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UNIVERSITY 

OF  CALIFORNIA 

LOS  ANGELES 


SCHOOL  OF  LAW 
LIBRARY 

Gift  of 
Howard  Surr 


FRAUDULENT  MORTGAGES 


OP 


MERCHANDISE. 


A  COMMENTARY  ON  THE  AMERICAN  PHASES 


TWYNE'S  CASE. 


BY 


JAMES   O.   PIEECE. 


Crescit  in  Orbe  Dolus. 


,  ST.  LOUIS: 

THE  F.  H.  THOMAS   LAW  BOOK  CO. 

1892. 


T 
1892^ 


Entered  according  to  Act  of  Congress,  in  the  year  1863,  by 

JAMES  O.  PIERCE, 

In  the  Office  of  the  Librarian  of  Congress  at  Washington. 


rRSSS  OF  NIXON-JONES  PRINTING  CO.,  312  PINB  ST.,  ST.  LOUIS. 


> 

1^ 


PREFACE. 


This  commentary  is  an  outgrowth  of  the  controversy 
which  has  distinguished  the  investigation,  in  the  American 
courts,  of  the  questions  of  the  legal  characteristics  of  mort- 
gages on  stocks  of  goods  in  trade,  with  power  of  sale  re- 
served to  the  mort2'a2:er,  and  of  the  legal  status  and  relations 
of  the  parties  to  such  transactions.  It  will  doubtless  be 
generally  understood  that  no  treatment  of  these  questions 
could  be  of  much  value,  which  should  attempt  to  present 
the  law  upon  the  subject  without  entering  into  the  con- 
troversy. For  this  reason,  no  apology  is  deemed  necessary 
for  the  controversial  character  of  much  of  this  commen- 
tary. 

While  entertaining  decided  views  on  the  subject  treated, 
the  author  has-  endeavored  to  present  fairly  those  views  of 
it  with  which  he  is  not  in  accord,  and  to  subject  them  to 
such  criticism  only  as  should  tend  to  test  their  relation  to 
the  acknowledged  fundamentals  of  our  American  jurispru- 
dence. The  difficulties  which  have  caused  the  particular 
controversy  are  believed  to  lie  deeper  than  its  immediate 
subject.  They  have  probably  grown  out  of  certain  defec- 
tive and  erroneous  views  concerning  the  question  of  fraud 
as  a  question  of  jurisprudence,  and  more  particularly  fraud 
in  conveyances  considered  in  respect  to  the  rights  of  those 

(iii) 


C?  /  /  /^  / 


IV  PREFACE. 

not  parties  to  such  conveyances;  views  -which  cliaracterized 
judicial  decisions  on  the  subject  before  mortgages  on  stocks 
of  goods  in  trade  because  of  frequent  use.  In  the  absence 
of  well  defined  and  clearly  understood  rules  on  the  general 
subject  of  fraud  in  conveyances,  it  is  not  strange  that  there 
should  be  want  of  accord  in  regard  to  the  class  of  convey- 
ances here  treated. 

Was  the  statute  of  13th  Elizabeth,  which  made  void  as  to 
third  parties  conveyances  into  which  a  fraudulent  intent 
entered,  creative  of  a  new  rule  of  law,  or  only  declaratory 
of  an  old  one?  If  declaratory  did  it  announce  exhaustively 
all  the  principles  of  the  common  law  on  the  subject?  Or 
were  there  other  features  sometimes  found  in  conveyances', 
besides  an  intent  to  defraud,  which  ought  to  or  might  make 
them  fraudulent  as  to  third  parties?  Is  the  term  fraudu- 
lent to  be  applied  alone  to  the  intent  of  the  parties,  or  is  it 
properly  applicable  to  the  transaction  itself  into  which 
the  parties  have  entered?  Does  the  law  look  with 
more  favor  upon  deceit  which  is  not  intended  by  those 
who  fail  to  stop  and  calculate  the  consequences  of 
their  acts,  than  upon  deceit  which  is  anticipated  and 
intended?  Must  jurisprudence  place  all  such  cases  upon 
a  Procrustean  bed  of  "  intent,"  and  follow  the  fiction  of 
imputing  an  intent  where  none  exists?  What  is  the  char- 
acter of  the  fraud  which  is  adjudicated  by  the  court  in  any 
such  case,  and  is  the  degree  of  the  fraud  affected,  limited 
or  enlarged  by  the  intent  of  the  parties?  In  any  such  case, 
can  the  rule  of  jurisprudence  be  in  any  way  affected,  either 
in  its  scope  or  effect,  or  the  manner  of  its  application  to  the 
facts  of  the  case,  by  the  mode  in  which  those  facts  are 
ascertained?     May  we  use  the  terms  "  actual  fraud,"  "  con- 


PREFACE,  V 

structive  fraud,"  and  "presumptive  fraud,"  in  discussing 
these  questions  ;  and  if  we  do,  should  we  apply  these  ad- 
jectives to  the  subject  of  fraud  with  any  other  than  their 
usual  and  strict  signification?  How  should  we  use  the  term 
"  fraud  in  law,"  if  used  at  all ;  and  what  do  we  mean  by 
"fraud  in  fact"? 

These  are  some  of  the  questions  which  must  be  consid- 
ered, and  to  which  the  legal  sense  of  the  profession  must, 
by  general  accord,  furnish  clear  and  satisfactory  answers, 
before  the  law  upon  the  subject  of  fraud  in  conveyances 
can  be  said  to  be  well  settled.  In  the  meantime,  much  dis- 
cussion is  inevitable,  and  doubtless  treatises  will  be  written 
and  re-written  on  the  general  subject  of  fraud  as  a  legal 
question,  distinguished  from  fraud  as  a  question  of  morals. 
This  commentary  is  offered  as  a  tentative  contribution  to 
the  discussion. 

Memphis,  January  1    1884. 


CONTENTS. 

Sections 
CHAPTER  I. 

The  Controversy 1-5 

CHAPTER  II. 
The  Doctrine  of  the  English  Cases 6-32 

CHAPTER  III. 
The  Doctrine  of  the  American  Majority       .        .  .        33-76 

CHAPTER  IV. 
The  Majority  Doctrine  Favored      ....  77-87 

CHAPTER  V. 
The  Views  of  the  American  Minority 88-100 

CHAPTER  VI. 
The  Minority  Views  Favored 101-106 

CHAPTER  VII. 
The  Question  not  Vital  in  some  Jurisdictions      .        .        .    107-113 

CHAPTER  VIII. 
Criticisms  upon  the  Doctrine  Examined         ....    114-132 

CHAPTER  IX. 
Supposed  Qualifications  of  the  Doctrine     ....     133-153 

CHAPTER  X. 
Other  Forms  op  Fraudulent  Reservation      ....    154-162 


FRAUDULENT   MORTGAGES 


MERCHANDISE. 


CHAPTER     I. 

THE  CONTROVERSY. 

Section  l.  The  controverted  questions. 

2.  The  doctrine  of  Robinson  v.  Elliott. 

3.  Distinction  between  Jictual  fraud  and  constructive  fraud. 

4.  The  dissenting  doctrine  of  Brett  v.  Carter. 

5.  Twyne's  case  the  origin  of  the  American  doctrine, 

§^  1 .  The  controverted  questions.  —  Two  questions  in 
jurisprudence,  arising  in  a  class  of  cases  of  frequent  occur- 
rence, have  been  extensively  agitated  in  the  United  States 
during  the  present  century,  the  discussion  of  which  has  de- 
veloped much  radical  difference  of  opinion.  They  are 
questions  of  fundamental  or  substantive  law,  whose  settle- 
ment upon  a  basis  satisfactory  to  all  candid  and  inquiring 
minds  is  a  matter  of  importance.  If  jurisprudence  be  to 
any  extent  a  science,  it  is  eminently  desirable  that  such  sub- 
stantive rules  as  it  has  should  be  accurately  ascertained  and 
correctly  formulated.  It  is  the  recognition  of  this  truth 
which  has  led  to  and  stimulated  the  discussion  referred  to. 
These  questions  may  be  stated  as  follows  :  — 
1.  Is  a  mortgage  of  a  stock  of  goods  in  trade,  under 
which  the  mortgager  is  permitted  by  the  mortgagee  to  sell 

1  1 


§  2     FRAUDULENT  MOHTGACES  OF  MEUCHANDISE. 

the  goods  at  his  discrotion  in  the  usual  course  of  his  busi- 
ness, inherently  and  essentially  fraudulent  as  to  creditors  of 
the  niorti^aijer? 

2.  If  it  be,  is  it  still  so  in  case  the  agreement  or  under- 
standing between  mortgagee  and  mortgager,  permitting 
such  sales,  is  not  shown  upon  the  face  of  the  mortgage,  but 
is  proven  hy  evidence  aliunde? 

Growing  out  of  these  fundamental  questions  are  other 
incidental  or  subsidiary  ones,  which  arc  merely  questions  of 
procedure,  but  which  have  been  often  but  improperly  treated 
as  questions  of  substantive  law,  and  the  discussion  of  which 
as  such  has  sometimes  led  to  a  confused  understanding  of 
the  extent  of  the  rules  of  substantive  law  on  the  subject. 
Without  at  present  stating  these  incidental  questions,  they 
maybe  classed  as:  First,  those  concerning  the  manner  in 
which  the  facts  shall  be  ascertained  in  controverted  cases; 
and  second,  those  concerning  the  sources,  form,  and  quality 
of  evidence  admitted.  It  may  be  assumed  that  both  these 
classes  of  questions  relate  merely  to  procedure,  and  that 
they  should  not  be  confounded  with  fundamental  questions. 
The  two  inquiries  above  formulated  will  probably  be  ac- 
cepted as  a  fair  presentation  of  all  the  questions  of  funda- 
mental law,  or  jurisprudence,  which  are  involved  in  the 
controversy.  The  following  pages  have  been  written 
in  the  belief  that  a  candid  and  impartial  investigation  finds 
both  these  questions  answered  in  the  affirmative  by  the 
great  weight  of  American  authority,  considering  the  deci- 
sions not  only  as  precedents,  but  as  enunciations  of  prin- 
ciple. 

§  2.  The  doctrine  of  Robinson  v.  Elliott.  — In  the  case 
of  Robinson  v.  Elliott,^  the  Supreme  Court  of  the  United 
States  was  confronted  with  the  duty  of  determining  deci- 
sively for  the  first  time,  the  first  of  these  questions,  upon 

1  22  Wall.  513  (1874). 


THE    CONTROVERSY.  §    2 

distinctively  common-law  principles,^  The  question  hav- 
ing been  already  much  controverted  in  America,  would,  it 
had  been  expected,  be  sooner  or  later  presented  to  the  Su- 
preme Court  for  its  consideration.  Its  answer  in  the  affirm- 
ative commits  that  court  to  a  doctrine  which  originated  in 
England,  but  which,  though  exotic,  has  been  so  effectually 
transplanted,  and  has  developed  so  extensive  a  growth  in 
the  soil  of  American  jurisprudence,  by  reason  of  its  adapta- 
tion to  the  peculiar  exigencies  of  our  commercial  interests, 
that  it  may  now  be  well  characterized  as  American.  Its 
tardy  growth  in  England,  a  misunderstanding  of  its  original 
scope  and  application,  and  a  confusion  of  views  as  to  the 
office  and  effect  of  certain  early  English  statutes,  had 
conspired  to  create  many  doubts  in  the  minds  of  jurists, 
both  as  to  the  soundness  of  the  English  doctrine  and  the 
propriety  of  its  cis-Atlantic  application.  The  settlement  of 
these  doubts,  it  had  been  supposed,  would  be  materially 
promoted  by  the  enunciation  of  a  rule  on  the  subject  by  our 
highest  tribunal.  This  result  has  been  attained  only  in 
part,  although  the  court  threw  the  weight  of  its  unanimous 
decision  upon  one  side  of  the  question.  The  controversy 
continues  to  such  an  extent  as  to  suggest,  and  perhaps  to 
justify,  an  attempt  to  explain  and  illustrate  the  question 
more  fully  than  has  yet  been  done,  by  examining  closely 
the  doctrine  in  question,  inspecting  its  origin,  tracing  its 
growth,  and  testing  its  soundness. 

It  was  decided  in  Robinson  v.  Elliott  that  a  chattel  mort- 
gage upon  a  stock  of  goods  in  trade,  which  permits  the 
mortgager  to  remain  in  possession  of  the  property,  and  in 
its  disposition  by  sale  in  due  course  of  trade  at  his  discre- 
tion, until  the  maturity  of  the  debt  purporting  to  be  se- 
cured by  it,  is  fraudulent  as  to  other  creditors,  and  is 
absolutely  void  as  to  them,  without  reference  to  the  bona 

'  The  question  had  been  presented,  but  not  adequately  considered,  in  the 
earlier  case  of  Bank  v.  Hunt,  11  Wall.  391  (1870). 

3 


§  3     FKAUDULENT  MORTGAGES  OF  MERCHANDISE. 

fides  of   the  mortgage  debt,   or  to  the  intentions  of   the 
mortsrairer  as  to  fraud.     The  leading  features  of  the  some- 
what  complex  doctrine  embodied  in  this  decision,  are,  that 
fraud  is  a  legal  question,  or  a  question  to  be  adjudicated  by 
a  court  upon  evidence;  that  whether  fraud  be  established  in 
any  case,  depends  not  only  upon  the  finding  of  the  facts  by  a 
jury  or  by  the  court,  but  also  upon  the  judgment  of  the 
law  on  the  facts  so  found  ;  that  a  necessary  tendency  to 
fraud,  in  a  transaction  such  as  that  stated  above,  may  be 
recognized  by  the  courts,  when  the  facts  of  the  case  are 
made  known  ;  that  when  such  a  tendency  is  recognized,  the 
law  characterizes  such  a  transaction  as  inherently  fraudu- 
lent ;  and  that  this  is  not  a  question  for  a  jury  to  determine 
in  any  case,  because  it  is  not  a  question  of  fraudulent  in- 
tent, nor   is  it  in  any  other   respect   a  question  of  fact. 
Whenever,  therefore,  it  appears  satisfactorily  to  the  court, 
that  by  an  agreement  between  the  parties,  the  mortgager 
has  been  permitted  to  remain  in  possession  of  the  stock  of 
ffoods  mortgased,  and  to  make  sales  thereof  in  the  usual 
course  of  trade,  the  case  is  ready  for  an  adjudication  that 
the  transaction  is  essentially  fraudulent.     The  fact  of  such 
agreement  may  appear  to  the  court  from  an  inspection  of 
the  written  contract ;  or  it  may  be  conceded  by  the  parties 
as  one  of  the  facts  of  the  case  ;  or  it  may  be  established  by 
the  verdict  of  a  jury  ;  or  be  proven  to  the  satisfaction  of 
the  court  by  evidence,  in  cases  where  no  jury  intervenes. 
But  the  manner  in  which  the  fact  of  such  an  agreement 
shall  be  established,  is  a  question  of  procedure  only  ;  and 
the  adjudication   of  fraud   by   the  court,    after   the  facts 
are  established,  is  a  matter  of  substantive  law.     It  is  in  this 
sense  that  such  mortgages  have  often  been  properly  said  by 
the  courts  to  be  fraudulent  in  law. 

§  3.  Distinction  between  actual    fraud  and    construc- 
tive fraud.  —  If  this  rule  shall  become  well  established,  it 
4 


THE    CONTUOVEKSY.  §    3 

will  result  that  our  American  jurisprudence  must  dispense 
with  the  old  distinction  between  "fraud  in  laVv "  and 
*'  fraud  in  fact,"  and  must  present  a  clearer  and  more  ac- 
curate distinction  between  actual  fraud  and  constructive 
fraud  than  the  one  heretofore  employed,  and,  in  general,  a 
more  philosophical  classification  of  the  protean  shapes  in 
which  fraud  is  found  lurking  in  fraudulent  conveyances. 
It  is  plain  that  the  fraud  which  distinguishes  such  cases  as 
Robinson  v.  Elliott,  if  it  be  fraud  at  all,  is  in  no  sense  con- 
structive or  presumptive  fraud  ;  it  is  actual  fraud,  in  as  full 
a  sense  as  if  it  had  been  evidenced  by  the  fraudulent 
intent  of  the  parties,  and  such  intent  were  established  by 
the  verdict  of  a  jury.  By  examining  the  objections  which 
have  been  interposed  to  this  doctrine,  the  student  will  see 
that  the  objectors  very  generally  denominate  it  a  doctrine 
of  "  constructive  fraud  ;"  and  this  erroneous  view  is  proba- 
bly responsible  for  the  greater  part  of  the  dissent  from  the 
doctrine.  Constructive  fraud  is  defined  by  Story  ^  as  mean- 
ing simply  that  by  reason  of  the  peculiar  relations  between 
the  parties  to  a  transaction,  a  suspicion  or  presumption 
arises  that  one  party  is  taking  or  may  secure  an  unfair  ad- 
vantage over  another,  and  that  this  presumption,  if  not 
rebutted  by  proof ,  may  result  in  setting  aside  the  transac- 
tion as  fraudulent ;  but  that  proof  of  bona  fides,  or  of 
absence  of  fraudulent  intent,  or  of  actual  indebtedness  not 
overstated,  may  suffice  to  rebut  the  presumption  and  vali- 
date the  transaction.  If  it  be  true  that,  in  the  class  of  cases 
in  question,  courts  which  treat  them  as  fraudulent  do  so 
upon  a  theory  of  presumption  or  of  constructive  fraud,  then 
it  logically  follows  that  proof  of  honest  intent,  or  of  actual 
indebtedness,  when  offered,  should  be  considered  in  deter- 
mining the  case,  and  that  issues  may  often  properly  arise  in 
such  cases,  w^hich  should  be  submitted  to  a  jury.  But  if  the 
logician  wrongly  assumes  as  a  premise  that  the  question  is 

1  Eq.  Jur.,  sect.  2-38,  311. 

5 


§    3  FRAUDULENT   MORTGAGES    OF    ^lEKfllANDISi:. 

one  of  constructive  fraud,  his  logic  will  lead  him  astray. 
It  will  appear  on  careful  examination  that  such  a  premise  is 
unwarranted.  The  question  is  not  one  of  constructive 
fraud.  There  is  nothing  in  such  a  case  as  Robinson  v. 
Elliott  which  necessarily  raises  a  suspicion  of  fraudulent 
intent,  such  as  the  suspected  party  should  disprove  or  such 
as  a  jury  must  consider.  There  is  no  occasion  for  resort  to 
presumption  or  construction.  On  the  facts  of  such  a  case, 
as  stated  in  the  preceding  section,  there  is  an  immediate  and 
conclusive  judgment  of  fraud.  The  fraudulent  tendencies 
and  features  of  the  transaction  form  the  basis  of  fact  on 
which  the  judgment  of  the  court  rests  ;  just  as  in  cises 
turnino-  on  intent,  the  verdict  or  finding  that  such  an  intent 
exists,  forms  the  basis  of  fact  for  the  judgment  or  conclu- 
sion of  the  court.  The  facts  being  made  apparent,  the 
judgment  of  the  laAV  thereon  is  inevitable.  The  truth  is, 
that  "constructive  fraud"  is  simply  a  convenient  rule  of 
practice,  by  which  courts  and  juries  are  assisted  in  settling 
the  facts  in  doubtful  cases.  In  such  cases,  the  law  in  effect 
says  to  the  suspected  party,  "  The  circumstances  are  against 
you,  and  raise  a  presumption  of  fraud,  which  Avill  cause  a 
decision  adverse  to  you  unless  you  successfully  rebut  that 
presumption."  No  one  doubts  this  to  be  a  salutary  rule  in 
cases  to  which  it  applies.  But  it  should  be  definitely  and 
accurately  understood,  and  should  not  be  confounded  with 
the  rule  in  Robinson  v.  Elliott.  "Constructive  fraud" 
and  "fraud  in  law"  are  not  synonymous  or  convertible 
terms.  "Actual  fraud"  and  "  fraud  in  fact  "  are  not  sy- 
nonymous or  convertible  terms.  "Actual  fraud  "  and  "  con- 
structive fraud"  are  antithetical  terms,  when  properly 
applied.  But  the  expressions  "  fraud  in  law  "  and  "  fraud 
in  fact"  are  ambiguous,  and  when  used  antithetically, 
are  misleading;  and  they  might  well  be  disused;  for 
in  every  case  of  fraud,  as  well  as  in  all  other  litigated 
cases,  the  elements  of  both  law  and  fact  are  necessarily  in- 
volved. 
6 


THE    CONTKOVEKSYo  §    4 

These  preliminary  observations  may  serve  to  illustrate 
the  controverted  questions  to  be  now  considered,  and  may 
assrst  in  explaining,  in  part  at  least,  the  occasion  for  the 
controversy. 

§  4.   The   dissenting-  doctrine   of  Brett  v.  Carter. — In 

the  present  aspect  of  the  controversy,  Brett  v.  Carter  ^  may 
be  considered  the  leading  case  in  opposition  to  the  doctrine 
of  Robinson  v.  Elliott.  In  this  case,  Lowell,  J.,  of  the 
United  States  District  Court  for  Massachusetts,  ventured 
"  to  doubt  both  tlie  generality  and  justice  "  of  the  doctrine 
announced  in  Robinson  v.  Elliott,  and  dissented  from  it  as 
a  new  doctrine  of  only  local  application.  His  opinion  states 
so  forcibly  the  leading  objections  offered  to  this  rule  of  law, 
and  is  so  boldly  critical  as  to  the  decision  of  his  superior 
tribunal,  as  to  make  it  perhaps  the  best  exponent  of  the 
views  which  it  supports,  and  the  best  test  which  can  be  ap- 
plied to  the  soundness  of  the  doctrine  in  question. 

Brett  V.  Carter  was  a  bill  in  equity  by  an  assignee  in 
bankruptcy  of  the  mortgager,  against  the  mortgagee  of  a 
stock  of  stationery.  The  debt  was  for  the  purchase-money 
of  the  stock  of  goods,  sold  by  the  mortgagee  on  a  credit, 
the  notes  maturing  at  different  times  during  four  years. 
The  mortgager  was  permitted  by  his  creditor  to  sell  the 
goods  in  the  ordinary  course  of  his  trade.  It  did  not  ap- 
pear, however,  that  any  provision  to  this  effect  was  incor- 
porated into  the  writings.  This  feature  of  the  case  must 
be  observed,  in  view  of  the  distinction  which  some  jurists 
have  taken,  that  in  all  cases  where  the  provision  allowing  the 
debtor  to  sell  the  goods  does  not  appear  on  the  face  of  the 
instrument,  but  is  shown  by  evidence  aliunde,  the  court 
will  not  find  fraud  in  law,  but  will  leave  it  to  the  jury  to 
find  fraud  in  fact.  The  opinion  of  the  court  was,  in  part, 
as  follows. 

*'  The  Court  of  Appeals  of  New  York  decided,  by  a  bench 

'  2  Low.  458 ;  3  C.  L.  J.  '28G  (1875). 


§    4  FRAUDULENT    MOKTGAGES    OF    MEKCIIANDISE. 

which  ^\a.fi  equally  divided  in  opinion,  that  a  mortgage  of 
chattels  which  })erniits  the  mortgager  to  continue  in  pos- 
session and  to  sell  the  goods  in  the  ordinary  course  of  busi- 
ness, is  void  on  its  face  as  mere  matter  of  law.^  This 
decision  has  had  a  remarkable  following,  and  its  doctrine 
ai)pears  to  have  become  the  settled  law  of  New  York,  Ohio, 
and  Illinois.  It  is  not  the  law  of  England,  Maine,  Massa- 
chusetts, Michigan,  or  Iowa  ;  in  several  States  it  has  not 
been  passed  upon.  But  as  this  new  doctrine,  or  rather, 
revival  of  an  old  one,  has  been  said  by  Mr.  Justice  Davis, 
of  the  Supreme  Court,  to  be  so  general  and  just  that  it  may 
be  presumed  to  be  the  law  of  Indiana,  in  the  absence  of 
express  and  unambiguous  decisions  of  the  courts  of  that 
State  to  the  contrary,  and  as  I  venture  to  doubt  both  the 
generality  and  the  justice  of  the  doctrine,  it  becomes  me, 
with  all  the  respect  I  feel  for  that  opinion,  to  state  my  rea- 
sons for  not  acceding  to  it.  If  the  rule,  whichever  way  it 
may  be,  were  a  settled  rule  of  property  in  Massachusetts, 
inquiry  into  its  history  or  justice  would  be  unnecessary ;  but 
although  I  have  no  doubt  my  decision  will  accord  with  the 
law  of  Massachusetts,  I  have  not  found  a  case  in  this  State 
in  which  the  decisions  in  New  York  were  reviewed,  and  it  is 
possibly  still  a  question  for  discussion.  I  had  supposed  it 
to  be  well  settled,  after  much  debate  and  conflict  of  opinion, 
certainly,  but  substantially  settled,  that  when  a  vendor  or 
mortgao-er  was  permitted  to  retain  the  possession  and  con- 
trol of  his  goods,  and  act  as  apparent  owner,  the  question 
whether  this  was  a  fraud  or  not  was  one  of  fact  for  the  jury, 
excepting  under  a  peculiar  clause  of  the  bankrupt  law  of 
England.  It  is  so  pronounced  by  Mr.  May  in  his  valuable 
treatise  on  Voluntary  and  Fraudulent  Conveyances,  page 
126,2  and  by  the  cases  he  cites  ;  and  by  the  learned  edi- 

1  Griswold  v.  Sheldon,  4  N.  Y.  581. 

2  Query,  p.  106. 

8 


THE    CONTROVERSY.  §    4 

tors,  both  English  and  American,  of  Smith's  Leading  Cases. ^ 
By  the  law  of  England,  as  I  understand  it,  there  are  no 
constructive  or  artificial  frauds,  or,  if  the  term  is  preferred, 
frauds  in  law,  remaining,  excepting,  1st,  such  as  are  ex- 
pressly made  so  by  statute;  as,  for  instance,  when  a  bank- 
rupt retains  the  order  and  disposition  of  goods  as  apparent 
owner,  with  the  consent  of  the  true  owner.  We  have  not 
adopted  this  part  of  the  bankrupt  law,  as  was  somewhat 
emphatically  said  in  a  late  case  in  the  Supreme  Court,  Saw- 
yer V.  Turpin.^  Or,  2d,  where  the  act  is  necessarily  a  fraud 
on  creditors;  as  where  an  insolvent  person  gives  away  a 
part  of  his  estate  for  no  valuable  consideration,  or  the 
whole  of  it  to  one  antecedent  creditor.  These,  to  be  sure, 
are  examples  ;  but  very  few  others  could  be  adduced  ;  and 
I  understand  the  true  law,  both  here  and  in  England,  to  have 
been,  until  lately,  that  a  conveyance  for  a  valuable  present 
consideration  is  never  a  fraud  in  law  on  the  face  of  the 
deed,  and  if  fraud  is  alleged  to  exist,  it  must  be  proved  as 
a  fact ;  and  that  was  the  law  even  before  registration  was 
required  for  the  benefit  of  persons  dealing  with  the  mort- 
gao;er. 

"  It  is  very  strange  that  after  our  legislatures  have  met 
the  difficulties  of  Twyne's  Case,  by  requiring  registration, 
which  gives  not  only  constructive,  but,  in  most  cases,  actual 
notice  of  mortgages,  and  when  many  of  them  have  pro- 
vided that  fraud  shall  be  a  question  of  fact  for  the  jury, 
the  decisions  which  I  have  cited,  and  others  following  them, 
should  have  reverted  to  the  harsher  doctrine,  which  had  al- 
ready grown  obsolete  before  the  laws  provided  any  notice  at 
all,  or  any  rule  of  evidence  about  fraud.  It  is  plain  that 
such  a  doctrine  virtually  prevents  a  trader  from  mortgaging 
his  stock  at  any  time  for  any  useful  purpose  ;  for  if  he  can 
not  sell  in  the  ordinary  course  of  trade,  or  only  as  the  trustee 

^  Notes  to  Twyne's  Case,  vol.  I.,  p.  1,  etc. 
"  91  U.  S.  114. 


§    4  FlIAUDULENT   3I0RTGAGES    OF   MERCHANDISE. 

and  agent  of  the  mortgagee,  he  might  as  well  give  posses- 
sion to  the  morto:ao:ee  at  once  and  m)  out  of  business.     In 

CO  o 

this  ease,  he  never  could  have  begun  business,  for  the  whole 
stock  was  supplied  by  the  defendant. 

''  I  Avould  refer  in  this  connection  to  the  very  able  opinions 
of  Judge  Dillon  in  Hughes  v.  Cory,^  and  of  Judge  Camp- 
bell in  Gay  v.  Bidwell,^  in  Avhich  they  refuse  to  follow  the 
decisions  in  New  York,  and  give  reasons  for  that  refusal, 
which,  in  my  judgment,  are  unanswerable. 

"If  it  be  said  that  this  is  one  of  those  cases  in  which 
fraud  is  a  necessary  result  of  the  deed,  all  I  can  say  is,  that 
this  brings  us  to  an  ultimate  fact  of  observation  and  expe- 
rience ;  and  I  am  unable  to  see  the  necessity.  Indeed,  it  is 
much  more  difficult  for  me  to  see  how  creditors  can  be  de- 
frauded in  such  a  case,  when  they  are  told  in  the  deed  itself 
that  the  debtor  has  no  credit,  and  no  property  that  he  can 
call  his  own,  than  that  the  mortgagee  is  most  outrageously 
defrauded  by  such  a  rule,  which  devotes  his  property  to  the 
payment  of  another  person's  old  debts,  the  very  instant 
that  he  has  parted  Avith  the  possession,  taking  back  a  se- 
curity which  is  admitted  to  be  honestly  given.  Take  this 
very  case  as  an  illustration.  It  is  admitted  that  there  was 
no  fraud  in  fact ;  that  the  trader's  w^iole  stock  was  supplied 
by  the  defendant ;  that  the  mortgage  shows  that  all  the 
stock,  present  and  future,  is  hypothecated,  not  as  a  cover 
or  blind,  for  there  was  none,  but  to  the  payment  of  a  certain 
debt  by  certain  instalments.  No  offer  is  made  to  prove 
that  any  one  was  deceived,  or  even  was  ignorant  of  the 
mortgage  ;  but  I  am  asked  to  find  fraud  in  law,  when  I 
know,  and  it  is  admitted,  there  was  none  in  fact.." 

These  positive  views  of  Judge  Lowell  are  stated  with  all 
the  earnestness  of  conviction.  To  fully  illustrate  the  char- 
acter of  the  issue  presented  between  him  and  the  appellate 

1  20  Iowa,  390.  ^  7  Mich.  519. 

10 


THE   CONTROVERSY.  §    4 

court,  it  is  only  necessary  to  quote  the  equally  incisive 
language  of  Mr.  Justice  Davis  in  Robinson  v.  Elliott,^  in 
which  case  the  stipulation  allowing  the  debtor  to  remain  in 
possession,  control,  and  disposition  of  the  stock  of  goods, 
appeared  on  the  face  of  the  instrument. 

"  If  chattel  mortgages  were  formerly,  in  most  of  the 
States,  treated  as  invalid  unless  actual  possession  was  sur- 
rendered to  the  mortgagee,  it  is  not  so  now,  for  modern 
legislation  has,  as  a  general  thing  (the  cases  to  the  contrary 
being  exceptional),  conceded  the  right  to  the  mortgager  to 
retain  possession,  if  the  transaction  is  on  good  consideration 
and  bona  fide.  This  concession  is  in  obedience  to  the  wants 
of  trade,  which  deem  it  beneficial  to  the  community  that 
the  owners  of  personal  property  should  be  able  to  make 
bona  fide  mortgages  of  it,  to  secure  creditors,  without  any 
actual  change  of  possession. 

"  But  the  creditor  must  take  care,  in  making  his  contract, 
that  it  does  not  contain  provisions  of  no  advantage  to  him, 
but  which  benefit  the  debtor,  and  were  designed  to  do  so, 
and  are  injurious  to  other  creditors.  The  law  will  not  sanc- 
tion a  proceeding  of  this  kind.  It  will  not  allow  the  credi- 
tor to  make  use  of  his  debt  for  any  other  purpose  than  his 
own  indemnity.  If  he  goes  beyond  this,,  and  puts  into  the 
contract  stipulations  which  have  the  effect  to  shield  the 
property  of  his  debtor,  so  that  creditors  are  delayed  in  the 
collection  of  their  debts,  a  court  of  equity  will  not  lend  its 
aid  to  enforce  the  contract.  These  principles  are  not  dis- 
puted, but  the  courts  of  the  country  are  not  agreed  in  their 
application  to  mortgages  with  somewhat  analogous  provi- 
sions to  the  one  under  consideration.  The  cases  cannot  be  re- 
conciled by  any  process  of  reasoning,  or  on  any  principle  of 
law.  As  the  question  has  never  before  been  presented  to  this 
court,  we  are  at  liberty  to  adopt  that  rule  on  the  subject 
which  seems  to  us  the  safest  and  wisest.     It  is  not  diflicult 

I  22  Wall.  513. 

11 


§    4  FRAUDULENT    MOKTGAGES    OF   MERCHANDISE. 

to  see  that  the  mere  retention  and  use  of  personal  property, 
until  default,  is  altofjether  a  different  thinu  from  the  reten- 
tion  of  possession  accompanied  with  a  power  to  dispose  of 
it  for  the  benefit  of  the  mortgager  alone.  The  former  is 
permitted  by  the  laws  of  Indiana,  is  consistent  Avith  the 
idea  of  security,  and  may  be  for  the  accommodation  of  the 
mort^airee :  but  the  latter  is  inconsistent  with  the  nature 
and  character  of  a  mortgage,  is  no  protection  to  the  mort- 
gagee, and  of  itself  furnishes  a  pretty  effectual  shield  to  a 
dishonest  debtor.  We  are  not  prepared  to  say  that  a  mort- 
ffaoje  under  the  Indiana  statute  would  not  be  sustained, 
which  allows  a  stock  of  goods  to  be  retained  by  the  mort- 
gager, and  sold  by  him  at  retail  for  the  express  purpose  of 
applying  the  proceeds  to  the  payment  of  the  mortgage 
debt.  Indeed,  it  would  seem  that  such  an  arrangement,  if 
honestly  carried  out,  would  be  for  the  mutual  advantage  of 
the  mortgagee  and  the  unpreferred  creditors.  But  there  are 
features  eno;rafted  on  this  mortorage  which  are  not  only  to 
the  prejudice  of  creditors,  but  which  show  that  other  con- 
siderations than  the  security  of  the  mortgagees,  or  their  ac- 
commodation even,  entered  into  the  contract.  Both  the 
possession  and  right  of  disposition  remain  with  the  mort- 
gagers. They  are  to  deal  with  the  property  as  their  own, 
sell  it  at  retail,  and  use  the  money  thus  obtained  to  replenish 
their  stock.  There  is  no  covenant  to  account  with  the  mort- 
gagees, nor  any  recognition  that  the  property  is  sold  for 
their  benefit.  Instead  of  the  mortgage  being  directed  solely 
to  the  bona  fide  security  of  the  debts  then  existing,  and 
their  payment  at  maturity,  it  is  based  on  the  idea  that  they 
may  be  indefinitely  prolonged. 

"  Manifestly  it  was  executed  to  enable  the  mortgagers  to 
continue  their  business,  and  appear  to  the  world  as  the  ab- 
solute owners  of  the  goods,  and  enjoy  all  the  advantages 
resulting  therefrom.  It  is  idle  to  say  that  a  resort  to  the 
record  would  have  shown  the  existence  of  the  mortgage ; 
12 


THE    CONTROVERSY.  §    4 

for  men  get  credit  by  what  they  apparently  own  and  pos- 
sess, and  this  ownership  and  possession  had  existed  without 
interruption  for  ten  years.  There  was  nothing  to  put  cred- 
itors on  their  guard.  On  the  contrary,  this  long-continued 
possession  and  apparent  ownership  were  well  calculated  to 
create  confidence  and  disarm  suspicion.  But  apart  from 
this,  security  was  not  the  leading  object.  If  so,  why  does 
Mrs.  Sloan's  note  remain  overdue  for  twenty-one  months, 
and  why  does  Robinson  continue  to  indorse  ?  This  conduct 
is  the  result  of  trust  and  confidence,  which,  as  Lord  Coke 
tells  us,  are  ever  found  to  constitute  the  apparel  and  cover 
of  fraud. 

"  In  truth,  the  mortgage,  if  it  can  be  so  called,  is  but  an 
expression  of  confidence,  for  there  can  be  no  real  security 
where  there  is  no  certain  lien.  Whatever  may  have  been 
the  motive  which  actuated  the  parties  to  this  instrument,  it 
is  manifest  that  the  necessary  result  of  what  they  did  do 
was  to  allow  the  mortgagers,  under  cover  of  the  mortgage, 
to  sell  the  goods  as  their  own,  and  appropriate  the  proceeds 
to  their  own  purposes,  and  this,  too,  for  an  indefinite  length 
of  time.  A  mortgage  which  in  its  very  terms  contemplates 
such  results,  besides  being  no  security  to  the  mortgagees, 
operates  in  the  most  effectual  manner  to  ward  off  other 
creditors;  and  where  the  instrument  on  its  face  shows  that 
the  legal  effect  of  it  is  to  delay  creditors,  the  law  imputes 
to  it  a  fraudulent  purpose.  The  views  we  have  taken  of 
this  case  harmonize  with  the  English  common-law  doctrine, 
and  are  sustained  by  a  number  of  American  decisions." 

The  diversity  of  conclusions  drawn  in  these  two  opinions, 
as  to  what  is  the  English  law  on  this  subject,  is  no  more 
striking  than  is  the  difference  they  disclose  as  to  the  duty 
of  judicial  opinion  on  the  subject.  The  Supreme  Court 
finds  itself  impelled  to  the  conclusion  that  the  transaction 
is  inherently  fraudulent,  which  is  accordingly  adjudicated. 
The   District  Court  does  not  think  it  should  have,  or  that 


§  5     FRAUDULENT  MORTGAGES  OF  MERCHANDISE. 

the  law  does  have,  any  opinion  on  the  subject.  Yet  the 
only  substantial  difference  in  the  aspect  of  the  two  cases,  as 
presented  to  the  courts  for  adjudication,  is  in  the  character 
of  the  evidence  by  which  the  reserved  privilege  of  selling 
tliC  goods  was  proven.  In  Robinson  v.  Elliott,  this  reser- 
vation appeared  on  the  face  of  the  instrument.  In  Brett 
V.  Carter,  it  appeared  by  evidence  aliunde;  but  that  it  did 
appear  is  manifest  from  the  facts  stated  in  the  opinion  of 
the  court.  There  was  one  entire  transaction  in  each  case. 
What  the  transaction  was,  appeared  in  one  case  partly  by 
written  and  partly  by  parol  evidence.  In  the  other  case, 
it  was  sufficiently  shown  by  the  written  contract  alone. 
But  that  this  difference  in  procedure,  as  to  the  mode  by 
which  the  agreement  is  proven,  can  furnish  no  reason  for  a 
difference  in  the  application  of  the  proper  rule  of  law,  will 
be  clearly  seen  from  the  adjudicated  cases. 

§  5.  TwjTie's  Case  the  origin  of  the  Americaii  doc- 
trine.—  The  controversy  will  be  best  understood,  not  only 
as  to  its  merits,  but  also  as  to  its  occasion,  by  a  careful 
examination  of  the  English  cases,  with  a  view  of  observing 
the  origin  and  tracing  the  development  of  the  doctrine  in 
question.  The  visible  origin  of  this  doctrine  is  to  be  found 
in  Twyne's  Case.^  It  has  come  down  to  us  with  as  little 
apparent  variation  from  its  original  form  as  has  any  other 
of  the  principles  announced  in  that  case,  while  it  is  per- 
haps the  most  important  of  them  all.  The  exhibitions  of 
this  doctrine,  as  an  active  force  in  the  jurisprudence  of  this 
country,  have  been  called  American  phases  of  that  cele- 
brated case,  because  the  doctrine  has  been  adopted  into 
our  jurisprudence  in  precisely  the  form  announced  in  the 
Star  Chamber  in  1601,  and  finds  a  ready  adaptation  to 
the  various  exigencies  of   our  jurisprudence.     Singularly 

1  3  Coke,  80. 
14 


THE    CONTROVERSY.  §    5 

enough,  it  is  virtually  outgrown  and  practically  abandoned 
in  England. 

Attention  is  invited  at  the  outset  to  the  fact  that  it  is  not 
the  mere  question  of  the  possession  of  the  goods  by  the 
debtor  that  is  now  to  be  looked  to  as  the  leading  question 
in  that  case. 

It  has  too  frequently  been  supposed  that  the  chief  and 
most  important,  if  not  the  only,  principle  of  law  adjudica- 
tions in  Twyne's  Case,  was,  that  the  retention  of  possession 
by  the  grantor  of  chattels  conveyed  by  him,  by  mortgage 
or  otherwise,  as  security  for  debt,  would  alone  suffice  to 
render  the  transaction  fraudulent  and  void,  as  to  his  other 
creditors  ;  and  the  idea  has  often  been  advanced  that  the 
principle  of  law  adopted  in  that  case  was  established  upon 
the  basis  of  a  presumption  of  fraudulent  intent,  thus  pre- 
senting a  case  under  the  statute  13  Eliz.,  c.  5.  Both  of 
these  views,  it  is  now  submitted,  were  erroneous.  Twyne's 
Case  did  not  turn  upon  the  question  of  retention  of  pos- 
session alone  ;  nor  was  it  necessary  to  the  determination 
of  that  case  to  impute  a  fraudulent  intent  to  the  grantor 
in  the  conveyance,  or  to  refer  to  the  statute  13  Eliz.,  c.  5, 
for  the  rule  of  law  which  should  govern  the  case. 

It  is  in  these  misapprehensions  as  to  the  scope  and  effect 
of  Twyne's  Case,  that  the  careful  student  of  the  law  of 
fraud  will  find  the  occasion  for  all  the  various  contro- 
versies that  have  arisen  in  reference  to  chattel  mort^asres, 
including  the  one  now  under  consideration.  Thus,  in  the 
earlier  decades  of  the  present  century,  there  was  waged  in 
this  country  an  earnest  and  learned  controversy  over  these 
questions  :  1st,  whether  retention  of  possession  under  such 
a  mortgage  is  conclusively  fraudulent  ;  or,  2d,  whether  it 
is  only  prima  facie  fraudulent;  and,  3d,  if  the  latter,  then 
what  explanation  of  such  possession  will  suffice  to  nega- 
tive the  suspicion  of  fraud.  The  disputants  very  generally 
took  the  view  of  Twyne's  Case  above  stated.     The  learned 

15 


§    5  FRAUDULENT   MORTGAGES    OF   MERCHANDISE. 

American  editors  of  Smith's  Leading  Cases,  in  their  notes" 
on  Twyne's  Case,^  have  given  their  chief  attention  to  the 
question  of  possession,  practically  overlooking  the  one  now 
under  consideration.  In  a  recent  article  in  the  American 
Law  Register,-  entitled  "  Sales  and  Conveyances  without 
Delivery  of  Possession,"  the  writer,  taking  up  the  subject 
where  the  editors  of  Smith's  Leading  Cases  left  it,  like  them 
treats  retained  possession  alone  as  the  im))ortant  question 
in  Twyne's  Case. 

The  text-writers  have  very  generally  fallen  into  the 
same  misapprehension.  Mr.  Cowen,  in  his  note  to  Bissel 
V.  Hopkins,^  where  the  rule  was  disaffirmed  that  reten- 
tion of  possession  alone  renders  a  mortgage  of  chattels 
fraudulent,  criticises  this  rule,  enumerates  twenty-four 
exceptions  thereto  which  he  finds  then  already  estab- 
lished by  decisions  in  England  and  America,  and  asks  : 
"What  does  the  rule  amount  to?  What  is  it  worth? 
And  does  its  preservation  merit  a  struggle?";  adding, 
"  Some  of  the  exceptions  are  almost  as  broad  as  the  rule 
itself."  This  rule  is  now  abandoned  in  nearly  all  the 
American  States,  and  the  controversy  over  it  is  here  re- 
ferred to  merely  as  an  illustration  of  past  misapprehensions 
concerning  the  scope  of  Twyne's  Case  ;  for  it  was  that  case 
to  which  reference  was  usually  made  for  the  origin  of  the 
rule;  yet  it  cannot  now  be  well  supposed  that  that  case  was 
ever  an  authority  for  such  a  rule.  The  courts  of  a  few 
of  the  States  still  adhere  to  this  rule,  probably  because  it 
became  at  an  early  day  too  well  fixed  in  their  jurisprudence 
to  be  disturbed,  and  not  because  it  would  now  be  advisedly 
adopted. 

It  is  obvious,  too,  from  the  language  of  the  opinion  in 
Brett  V.  Carter,  above    quoted,  that  the  court  deli^'ering 

1  Vol.  1,  p.  47. 

'■'  18  Am.  L.  Reg.  137  (1879). 

'  3  Cowen,  16« ; .  15  Am.  Dec.  259. 

16 


THE    CONTROVERSY.  §    5 

that  opinion  supposed  Twyne's  Case  to  have  been  decided 
upon  rules  of  constructive  or  artificial  fraud,  probably  by 
imputing  to  the  parties  a  fraudulent  intent ;  and  considered 
that  the  applicability  of  these  rules  to  such  cases  had  been 
destroyed  by  modern  statutes,  and  that  the  only  fraud  in 
fact  of  which  courts  take  cognizance,  is  fraud  existing  in 
the  intent  of  the  parties,  to  determine  which  will  of  course 
usually  require  the  verdict  of  a  jury.  It  is  further  obvious 
that  that  court  supposed  the  secrecy  of  the  transaction  to  be 
the  principal  invalidating  feature  of  Twyne's  Case,  a  feature 
which  Avould  have  been  effectually  removed  by  notoriety, 
and  that  this  result  has  been  fully  accomplished  for  all  sim- 
ilar cases  in  the  future,  by  the  modern  statutes  requiring 
registration  of  chattel  mortgages;  for  registration  gives 
"  not  only  constructive,  but  in  most  cases  actual  notice," 
and  thus  meets  all  '<  the  difficulties  of  Twyne's  Case."  But 
it  is  submitted  that  these  views  also  rest  in  a  grave  misap- 
prehension of  the  law  of  that  case ;  that  the  secrecy  of  the 
transaction  was  not  its  worst  feature  ;  that  the  broadest 
notoriety,  either  constructive  or  actual,  would  not  have 
made  it  a  valid  or  legal  transaction  ;  that  the  fraud  therein 
discovered  was  actual,  not  presumptive  or  artificial  fraud; 
that  it  rested  particularly,  not  in  the  intent  of  the  debtor, 
but  in  the  inherently  fraudulent  character  and  tendency  of 
the  transaction  ;  and  that  for  this  reason,  the  case  did  not 
find  its  rule  alone  in  the  statute  13  Eliz.,  c.  5,  but  in  the 
common  law,  which  would  have  furnished  an  apt  and  ade- 
quate rule,  without  the  statute. 

Instances  of  this  broader  view  of  the  characteristic  ele- 
ments of  Twyne's  Case  are  found  in  our  American  jurispru- 
dence, even  at  an  early  day.  Mr.  AngelP  observed  the 
indicia  of. fraud  in  that  case  to  be  "  that  the  vendor,  after 
a  bill  of  sale  of  chattels  for  a  valuable  consideration,  re- 

1  Angell  on  Assignments,  80. 

2  17 


§  5     FRAUDULENT  MORTGAGES  OF  MERCHANDISE. 

iTiJiined  in  possession,  and  exercised  acts  of  ownership  over 
the  goods.''  Chancellor  Lansing,  in  1808,  criticised  the 
remark  of -Lord  Manstield,  that  "  even  before  the  statute,^ 
if  a  man  had  conveyed  his  own  goods  to  a  tliird  i)erson,  and 
had  kept  the  possession,  such  possession  would  have  been 
void,  as  being  fraudulent  according  to  the  doctrine  in 
Twyne's  Case,  3  Kep.  81," '^saying  of  it,  "This  opinion 
rather  narrows  the  doctrine  in  Twyne's  Case,  as  it  required 
the  execution  of  the  power  to  sell  to  constitute  the  possession 
fraudulent."  ^ 

To  ascertain  the  doctrine  properly  to  be  drawn  from 
Twyne's  Case,  a  careful  scrutiny  will,  in  the  next  chapter, 
be  made  of  that  case  and  those  succeding  English  cases 
which  presented  similar  states  of  facts. 

1  21  Jac.  1. 

2  Mace  V.  Cadell,  1  Cowp.  232  (1774). 

8  Sands  v.  Codwise,  4  Johns.  536  (at  p.  564) ;  4  Am.  Dec.  305. 
18 


DOCTRINE    OF    THE   ENGLISH    CASES.  §    6 


CHAPTER    II. 

THE  DOCTRINE  OF  THE  ENGLISH  CASES. 

Section  G.  Retained  power    of    disposition  tlie  important  element   ia 
Twyne's  Case. 

7.  Eyall  v.  Rowles;  the  same  element  present. 

8.  Worseley  v.  De  Mattos;  Lord  Mansfield's  opinion. 

9.  Edwards  v.  Harben;  power  of  disposition  the  fatal  feature. 

10.  Lord  Kenyon's  opinion  in  Paget  v.  Perchard. 

11.  Wordall  v.  Smith;  the  same  element  present, 

12.  Reed  v.  Blades;  views  of  Chief  Justice  Mansfield. 

13.  Armstrongs.  Baldock;  the  same  element  present. 

14.  Cases  supposed  to  be  antagonistic;  Benton  v.  Thornhill. 

15.  Bucknall  v.  Roiston  of  doubtful  authority. 

16.  The  element  of  a  reserved  power  of  sale  found  in  eight  cases. 

17.  Mere  retention  of  possession  unimportant. 

18.  Retention  of  possession  alone  not  conclusive  of  fraud;  Stone 

V.  Grubham. 

19.  Lord  Holt's  dictum  in  Meggot  v.  Mills. 

20.  Views  of  Lord  Mansfield  in  Cadogan  v.  Kennett. 

21.  Lord  Eldon's  views;  Buller's  synopsis  of  Twyne's  Case. 

22.  Lord  Eldon's  further  views  of    Twyne's  Case;  Arundel  v. 

Phipps,  and  Ex  parte  "Williams. 

23.  Lord  EUenborough's  views. 

24.  Views  of  Chief  Justice  Mansfield  in  Steel  v.  Brown. 

25,  26.  Judicial  doubts;  Jezeph   v.  Ingram, Wooderman  v.  Baldock, 
and  Steward  v.  Lombe. 

27.  Lord  Tenterden's  views;  Latimer  v.  Batson,  and  Eastwood 

V.  Brown. 

28.  The  question  of   the  effect  of    possession  alone  settled  in 

Martindale  v.  Booth. 

29.  Edwards  v.  Harben  further  explained  in  Macdona  v.  Swiney. 
80.  Late  English  cases;  the  question  of  power  of  sale  not  con- 
sidered. 

31.  Late  English  cases ;  the  question  not  involved. 

32.  The  doctrine  of  Twyne's  Case  superseded  in  England. 

§  6.   Retained  power  of  dispo.sition  the  important  ele- 
ment in  Twyne's  Case.  — The  rule  of  Twyne's  Case  which 

19 


§    <>  FRAUDULEXT   MORTGAGES   OF   MERCHANDISE. 

is  applied  in  Robinson  v.  Elliott,  is  illustrated  in  the  second 
resolution  of  the  Star  Chamber,  viz. :  "The  donor  con- 
tinued in  possession,  and  used  them  as  his  own;  and  by 
rea,son  thereof  he  traded  and  trafficked  with  others,  and  de- 
frauded and  deceived  them ;  "  and  in  the  fifth  resolution, 
which  is  allied  to,  if  not  drawn  from  and  depending  on,  the 
second,  viz.:  "  Here  was  a  trust  between  the  parties,  for 
the  donor  possessed  all,  and  used  them  as  his  proper  goods, 
and  fraud  is  always  apparelled  and  clad  with  a  trust,  and 
trust  is  the  cover  of  fraud."  If  one  be  indebted  to  sev- 
eral, and  makes  a  gift  of  all  his  goods  to  one  creditor  in 
satisfaction  of  his  debt,  says  the  learned  reporter,  "  but 
there  is  a  trust  between  them  that  the  donee  shall  deal 
favorably  with  him  in  regard  of  his  poor  estate,  either  to 
permit  the  donor,  or  some  other  for  him,  or  for  his  benefit, 
to  use  or  have  possession  of  them,  and  is  contented  that  he 
shall  pay  him  his  debt  lohen  he  is  able,  this  shall  not  be 
called  bona  fide.""  This  language,  though  applied  to  a  sup- 
posed case  of  a  sale  or  a  gift  —  perhaps  secret,  as  in  Twyne's 
Case  — yet  describes  very  aptly  the  result  of  all  cases  under 
mortgages,  such  as  Robinson  v.  Elliott,  or  Brett  v.  Carter. 
Publicity,  notice,  registration,  actual  consideration,  all  fade 
into  immateriality  in  view  of  an  agreement  under  a  mort- 
gage that  the  mortgager  shall  continue  to  use  the  goods  as 
*'  his  own  proper  goods,"  and  practically  shall  pay  his  se- 
cured creditor  when  he  is  able,  or  is  ready,  to  do  so;  for 
that  is  all  that  is  in  reality  left  of  the  arrangement  mis- 
called a  mortgage.  Some  of  the  later  English  cases  have 
not  announced  this  vicious  principle,  in  the  most  apt  terms, 
as  the  reason  for  their  decisions.  But,  in  the  cases  below 
referred  to,  the  fact  notably  existed  of  a  reservation  of 
this  kind  by  the  debtor  for  his  benefit.  It  has  been  often 
said  that  courts  may,  and  frequently  do,  give  most  correct 
judgments  without  illustrating  them  by  the  logical  reason- 
ing which  might  have  been  presented  as  their  inherent 
20 


DOCTRINE    OF    THE   ENGLISH    CASES.  §    7 

strength  and  support.  Doubtless,  in  England  as  in  America, 
jurists  have  felt  the  full  force  of  the  facts  of  the  case,  and 
the  necessarily  fraudulent  tendency  of  a  reservation  of  a 
power  of  sale  and  disposition  under  such  conveyance,  with- 
out expressing  their  feelings  and  convictions  in  apt  terms. 
Especially  may  we  accept  this  as  the  fact  when  we  find 
them  referring,  without  further  explanation,  to  Twyne's 
Case  as  authority,  and  find  the  proper  authority  in  the  sec- 
ond and  fifth  items  of  the  judgment  of  the  Star  Chamber, 
and  the  facts  to  which  that  judgment  applied. 

§  7.  Ryall   v.  Rowle."^;  the    same  element   present. — 

The  earliest  reported  case,  after  Twyne's  Case,  is  Ryall  v. 
Rowles,^  arising  in  1749.  (It  is  reported,  also,  as  Ryall  v. 
Rolle.^)  This  was  a  case  of  a  mortgage  of  utensils  and 
stock  of  goods  in  trade  of  a  brewer,  the  mortg-aser  havins: 
not  only  retained  possession,  but  continued,  as  usual,  with 
his  business.  The  goods  conveyed  were  "  utensils,  hops, 
malt,  fixtures  to  the  freehold,  and  stock  in  trade,"  as  stated 
by  one  of  the  judges.^ 

The  case  was  considered  under  the  statute  21  Jac.  I.,  c. 
19,  relatino;  to  insolvencies.  But  it  was  argued  on  general 
principles,  applicable  to  every  case,*  and  the  principle  under 
discussion,  which  had  its  origin  prior  to  that  statute,  was 
found  to  be  involved,  and  was  adjudicated.  Burnet,  J., 
said:  "  The  leading  case  on  this  is  Twyne's  Case,  where  it 
is  held  that  it  was  upon  a  valuable  consideration,  but  not 
bona  fide,  from  the  continuing  in  possession  and  trading 
tlievewitli .  It  is  difficult,  unless  in  very  special  cases,  to 
assign  a  reason  why  an  absolute  or  conditional  vendee 
of   goods    should    leave  them  with  the  vendor,  unless  to 

1  1  Ves.  sr.  348. 

2  1  Atk.  165,  and  1  Wilson,  2G0. 

3  1  Atk.  175. 

*  See  May  on  Fraud.  Conv.  117. 

21 


§    7  FRAUDULENT   -MORTGAGES   OF   MERCHANDISE. 

procure  a  collusive  credit ;  and  it  is  the  same,  whether  in 
absolute  or  conditional  sales."  ^  Lord  Ilardwicke,  durins: 
the  argument  of  counsel,  replied  to  their  suggestions  as 
follows :  "  The  chattels  are  stock  and  utensils  in  trade,  the 
debts  due  and  to  be  due ;  and  yet,  possession  of  the  whole 
left  with  the  bankrupt,  who  had  the  order  and  disposition 
of  them  as  before,  sold,  (iUe7'ed  and  disposed  as  oivner, 
was  reputed  as  such,  and  all  this  with  the  express  consent 
of  the  mortgagee,  who  might  have  prevented  this.  Nor 
was  he  to  account  with  the  desponee  for  what  he  should 
sell,  nor  for  any  of  the  debts  he  should  recover;  that 
might  probably  have  altered  the  case."  ^  All  the  four 
judges  agreed  in  exposing,  in  their  opinions,  the  fraudu- 
lent and  delusive  character  of  such  misnamed  mortsaees: 
and  it  was  stated  that  the  statute  of  13  Eliz.,  on  which 
in  part  the  decision  was  rested,  was  "  only  declaratory 
of  the  common  law."^  The  case  of  Stei:)hens  v.  Sole,  in 
which' fraud  was  adjudicated  by  Lord  Chancellor  Talbot,  in 
1736,  was  referred  to  approvingly  by  all  the  judges.  The 
substance  of  that  case  was  thus  cited  by  Lord  Hardwicke, 
in  Bourne  v.  Dodson.*  "There  a  person,  owner  of  three 
hoys  belonging  to  the  river  Thames,  mortgaged  them,  and 
after  he  had  so  done,  was  suffered  by  the  mortgagee  to 
make  use  of  them  in  the  same  manner  as  before  for  three 
years  together,  and  appeared  to  all  intents  the  visible  owner ^ 
and  persons  lent  him  money  upon  the  credit  of  his  being 
the  owner,  and  therefore  a  very  strong  case." 

Ryall  V.  Rolle  was  reported  by  Wilson  in  a  brief  and 
concise  form,  in  language  which  shows  clearly  what  was 
then  understood  to  be  the  doctrine  of  the  case.  The  entire 
report  of  the  decision  is  as  follows  :  ° 

"Ryall  V.  Rolle.  Li  chancery,  before  Lord  Hardwicke, 
assisted  by  Lee,  Chief  Justice  B.  R.,  Parker,  Chief  Baron 

1  1  Ves.  sr.  360.  2  j  ygg.  gr.  353. 

3  1  Atk.  178.  4  1  Atk.  157. 

5  1  Wilson,  2G0. 

22 


DOCTRINE   OF    THE    ENGLISH    CASES.  §    8 

of  the  Exchequer,  and  Burnett,  one  of  the  judges  of  the 
C.  B ;  who  delivered  their  opinions  seriatim  upon  the  27th 
of  January,^  and  unanimously  gave  judgment  that  if  a  man 
mortgages  his  goods  and  chattels  and  debts  for  a  valuable 
consideration,  and  the  mortgagee  permits  the  mortgager  to 
keep  possession,  and  to  have  the  ordering,  selling,  and  dis- 
posing thereof,  this  gives  the  mortgager  a  false  credit,  is 
fraudulent  against  creditors,  and  the  mortgager  afterwards 
becoming  bankrupt,  the  assignees  under  the  commission  are 
entitled  to  have  these  goods." 

§  8.  Lord  Mansfield's  opinion  in  Worseley  v.  De 
Mattes.  —  Worseley  v.  De  Mattos'^  was  determined  in 
1758.  One  Slader  had  mortgaged  all  his  goods,  materials, 
and  stock  in  trade  as  a  brewer,  as  security  for  debt,  and 
had  authorized  the  mortgagee  to  enter  and  take  possession 
upon  default  of  payment.  A  feigned  issue  was  sent  put  of 
chancery  to  determine  whether  Slader,  by  this  mortgage, 
had  committed  an  act  of  bankruptcy.  It  was  held  that  he 
had,  not  by  vu'tue  of  any  provision  of  the  statutes  of  bank- 
ruptcy, but  because  the  transaction  was  fraudulent  as  to 
creditors,  under  13  Eliz.,  though  made  by  way  of  security 
and  for  a  valuable  consideration.  Lord  Mansfield  cited  the 
second  resolution  in  Twyne's  Case,  emphasizing  the  words 
referring  to  the  power  of  disposition  of  the  goods,  and 
said :  ' '  By  the  express  tenor  of  the  deed,  Slader  was  to  have 
the  absolute  order  and  disposition  as  before.  In  fact,  he 
was  permitted  to  continue  in  possession  and  act  as  owner. 
They  who  dealt  with  him  trusted  to  his  visible  trade  and 
stock.  They  trusted  to  the  bankrupt  law,  that  he  could 
neither  have  sold  nor  mortgaged;  and  in  case  of  a  misfor- 
tune, that  his  effects  must  be  equally  distributed.  They 
were  imposed  upon  by  false  appearances." 

1  1749.  ^  Burr.  467. 

23 


§    9  FRAUDULENT   MORTGAGES    OF    MERCHANDISE. 

§    9.  Edwards  v.    Harben ;  Power    of  disposition    the 
fatal    feature.  —  Next   in  order  of    time  cuine    the  cele- 
brated case  of  Edwards  v.  Harben,*  involvini;  a  bill  of  sale 
of  household  furniture,  medicines,  and  a  stock  in  trade,  of 
which  possession  was  not  to   be  delivered  until  after  four- 
teen days  from  the  date  of  the  bill,  which  was  in  effect  a 
mortgage,  being  given  to  secure  a  debt.     Possession  was 
not,   in    fact,  taken  under  it  until  after  the  death  of  the 
grantor.     Bullcr,  J.,  said,  in  deciding  the  case:    "  We  are 
all  of  opinion  that  if  there  is  nothing  but  the  absolute  con- 
veyance without  the  possession,  that,  in  point  of  law,  is 
fraudulent."     The  power  over  and  disposition  in  trade  of 
the  stock  of  goods  were  urged  upon  the  court,  by  the  coun- 
sel  attacking   the    conveyance,    as   material   to   show   the 
fraud.  He  argued,  first,  that  continued  possession  of  chattels 
sold  was  prima  facie  evidence  only  of  an  intent  to  defraud; 
and  secondly,  that  "  whenever  there  is  a  positive  agreement 
between  the  parties  that  the  vendor  shall  be  permitted  after 
the  sale,  to  have  for  any  space  of  time,  not  only  the  mere 
manual  occupation,  but  also  the  disposition  of  the  goods 
sold,  to  trade  with  them  as  his  own,  it  is  an  actual  fraud  on 
the  creditors  of  the  vendor."     He  stated  in  the  folio  wins 
words  the  collusive  proposition  from  the  creditor  to  the 
debtor,  which  is,  in  fact,  embodied  in  such  a  transaction, 
whether  spoken  or  not.     "If  you  will  put  me  in  a  situa- 
tion to  be  safe  against  your  other  creditors,  I  will  leave  you 
in  that  which  shall  induce  them  not  to   attack  you.     You 
shall  preserve  the  creditors  from  having  possession ;  I  will 
retain  the  security  from  the  real  ownership.     Give  me  the 
command  of  the  property,  you  shall  have  it  to  hold  out  to 
the  world  and  your  creditors  as  your  own."  ^ 

Though  these  features  of  the  case  are  not  specifically 
mentioned  by  the  court,  yet  it   is  difficult  to  avoid  the  con- 

1  2  Term  R.  587  (1788).  ^  pp.  589,  590. 

24 


DOCTRINE    OF   THE    ENGLISH    CASES.  §    10 

elusion  that  the}'  influeneed  and  controlled  its  decision. 
But  this  case  has  been  extensively  followed  as  'the  leading 
precedent  for  the  rule  that  retention  of  possession  by  the 
mortsasrer  will  alone  suffice  to  render  a  niorto;a2:e  of  chat- 
tels  fraudulent.  It  is  with  reference  to  this  case  that  Mr. 
Cowen  criticised  this  supposed  rule  as  above  mentioned.^ 
Indeed,  it  is  not  strange,  in  view  of  the  inexact  language  of 
Mr.  Justice  Buller,  just  quoted,  that  such  a  view  should  be 
taken  of  the  case  in  America,  particularly  as  the  same  error 
is  observed  in  many  of  the  English  cases.  Yet  there  are 
not  wanting  English  cases,  as  will  be  seen  below,  which 
support  the  view  of  Edwards  v.  Harben,  here  presented,  and 
recognize  it  as  an  authority  to  precisely  this  extent. 

Bamford  v.  Baron  is  referred  to  by  Buller,  J.,  in  con- 
nection with  Edwards  v.  Harben,  and  is  reported  in  con- 
nection with  it.-  It  was  a  case  where  the  debtor,  after  con- 
veying a  stock  of  goods  in  trade  to  trustees,  had  retained 
possession  and  made  sales,  but  he  alleged  that  he  had  un- 
dertaken to  account  to  the  trustees  for  all  the  profits  of  the 
trade.  This  was  held  not  sufficient  to  validate  the  transac- 
tion, and  applying  the  same  doctrine  announced  in  Edwards 
V.  Harben,  the  court  by  Buller,  J.,  granted  a  new  trial,  set- 
ting aside  the  verdict  which  sustained  the  transaction. 

§  10.  Lord  Kenyon's  opinion  in  Paget  v.  Perchard.  — 

In  Paget  v.  Perchard,^  one  Mrs.  Spencer,  an  inn-keeper, 
had  given  to  her  distillers  a  bill  of  sale  of  all  her  eifects, 
including  the  liquors  in  the  house,  as  well  as  furniture. 
The  grantees  were  in  possession,  yet  they  had  permitted 
Mrs.  S.  to  sell  liquors  in  the  usual  way  of  trade,  for  one  day, 
and  to  receive  the  money,  not  accounting  for  it  to  them. 
Lord  Kenyon  said:  "That  the  allowing  Mrs.  Spencer  to 
appear,  as  usual,  mistress  of  the  house,  and  to  execute  acts 

1  See  sect.  5.  2  2  Term  R.  594.  »  1  Esp.  205  (1794). 

25 


§  12    FRAUDULENT  MORTGAGES  OF  MERCHANDISE. 

of  ownership,  after  having  parted  with  all  her  property  by 
the  1)111  of  sale,  was  inconsistent  with  such  situation,  and  a 
sufficient  evidence  of  fraud  as  against  bona  fide  executions  ;  " 
and  he  therefore  directed  a  non-suit,  thus  evidencinsr  his 
view  of  the  judicial  duty  to  declare  a  fraud. 

§  11.  Wordall  v.  Smith  ;  tlic  same  element  present.  — 

Wordall  v.  Sraith,^  tried  before  Lord  Ellenborough  in  1808, 
is  a  case  much  like  the  preceding.  After  a  bill  of  sale  of 
the  household  furniture  and  the  stock  in  trade  of  a  publican, 
the  grantee  took  a  colorable  possession  by  putting  his  ser- 
vant into  the  house  ;  but  the  grantor  continued  the  business 
as  before  and  had  control  of  the  sales  of  liquor.  Lord 
Ellenborough 's  charge  to  the  jury  based  the  fraudulent 
character  of  the  transaction  upon  the  colorable  possession ; 
still,  it  is  evident  that,  as  in  Twyne's  Case,  the  control  of 
the  property  by  the  grantor,  rather  than  the  mere  posses- 
sion, was  felt  by  the  court  as  the  vital  feature  of  the  case. 

§  12.   Sir  James  Mansfield's  views  in  Reed  v.  Blades. — 

Reed  v.  Blades,^  in  the  Common  Pleas  in  1813,  is  an 
instructive  case.  Though  it  is  reported  with  the  head-note 
that  "  a  conveyance  of  chattels  unaccompanied  with  pos- 
session is  void,"  it  is  not  an  authority  for  sobroad  a  jirop- 
osition.  The  case  presented  a  conveyance  to  trustees,  in 
trust  for  certain  purposes,  including  the  payment  of  debts, 
of  the  goods,  chattels  and  other  movable  property  in  an 
opera  house,  together  with  the  rents,  issues,  profits,  sub- 
scriptions, door  money,  and  other  income  of  the  building 
and  the  business.  The  trustees  never  took  possession  of  the 
opera  house,  nor  the  chattels  named,  nor  assumed  the  con- 
duct of  the  business,  nor  did  Sandell,  the  present  claimant, 
who  claimed  under  a  subsequent  purchase.    During  the  period 

1  1  Camp.  332.  -=  5  Taunt.  212. 

26 


DOCTRINE    OF   THE    ENGLISH    CASES.  §    12 

from  1808  to  1811,  the  report  states,  Taylor,  the  grantor, 
"  continued  to  act  as  the  ostensible  owner  of  the  property; 
he  made  all  contracts  in  his  own  name,  received  all  the  pro- 
ceeds, paid  them  to  his  own  account  at  the  bankers,  and  drew 
.for  money  from  thence  in  his  own  name."  Mansfield,  C.  J., 
who  presided  at  the  trial,  directed  the  jury,  that  Sandell, 
the  claimant  of  the  goods,  never  having  acted  nor  had  any 
concern  in  the  management  or  possession  of  the  opera 
house,  the  supposed  sale  to  him  in  1709  was  wholly  inopera- 
tive, and  that  the  goods  were  liable  to  seizure  as  the  prop- 
erty of*Tay  lor  ;  and  this  direction  controlled  the  verdict .  On 
a  motion  for  a  new  trial  before  the  full  bench,  the  judges  all 
agreed  in  refusing  it,  on  the  ground  that  Taylor  had  con- 
tinued in  not  only  the  possession,  but  the  visible  actual 
ownership,  control  and  disposition  of  the  property  and  the 
business.  Mansfield,  C.  J.,  said:  "  The  case,  when  exam- 
ined, depends  on  very  simple  points.  The  first  question  is, 
whether  Taylor  and  Goold  had,  quoad  their  creditors,  the 
legal  possession  of  the  goods  in  this  opera  house.  Taylor 
is  the  only  j^^^'^^on  tvJio  has  the  management,  orders  the 
dresses,  purchases  the  goods,  is,  to  all  the  world,  the  visible 
oivner  and  possessor.  In  1792,  a  secret  trust  deed  is  exe- 
cuted to  trustees  for  certain  creditors,  etc.  What  do  the 
trustees  do?  JSfothing.  What  do  those  creditors  get^ 
Nothing.  Taylor  continues  the  acting  and  visible  owner 
and  possessor ;  it  is  nevertheless  contended,  this  legal 
property  all  passed  to  these  trustees.  Now,  where  the 
subject  of  the  deed  is  goods,  and  the  possession  never  taken 
by  the  trustees,  and  nothing  done  under  it,  how  can  it  be 
said  these  goods  may  not  be  taken  in  execution  under  a 
judgment  against  Taylor?  I  do  not  wonder  that  the  trus- 
tees should  be  unwilling  to  act  in  such  a  troubled  business, 
but  then  they  should  not  undertake  such  trusts  ;  they  might 
appoint  agents  to  make  all  contracts  and  conduct  all  man- 
agement, or  they  may  let  Taylor  make  contracts  with  their 

27 


§  14    FKAUDULENT  MORTGAGES  OF  MERCHANDISE. 

express  assent ;  but  they  do  nothing  of  all  this;  as  to  all 
the  world,  then,  the  trust  deed  is  void,  and  I  cannot  at  all 
feel  that  it  stands  in  the  way  of  the  right  of  creditors  to 
take  these  goods  as  the  goods  of  Taylor.  Though  I  wished 
to  avoid  this  question,  and  send  it  where  all  the  conflicting 
interests  might  be  better  taken  care  of,  I  am  obliged  to  de- 
cide it  by  saying,  that  they  who  sell  goods  to  Taylor  may,  so 
far  as  these  trustees  arc  concerned,  take  the  goods  in  exe- 
cution as  the  goods  of  Taylor."  And  he  disposed  in  like 
manner  of  the  claim  that  Sandell  had  acouired,  under  the 
circumstances,  a  valid  title  to  the  goods. 

§  13.  Armstrong  V.  Baldock ;  the  same  element  pres- 
ent. —  Armstrong  v.  Baldock^  is  a  case  where  the  instruc- 
tions to  the  jury  were  placed  on  the  ground  alone  that 
possession  remaining  with  the  grantor  is  fraudulent  in  law  ; 
the  case  being  one  of  a  conveyance  which  included  a  stock 
in  trade  together  with  household  furniture.  The  action  was 
trover  for  the  furniture  only,  not  for  the  stock  in  trade.  The 
case  has,  however,  been  recognized  by  the  English  bar  as 
really  resting  on  the  same  basis  as  the  cases  above  referred 
to.  The  language  of  Dallas,  C.  J.,  plainly  refers  to  the 
point  that  the  grantor  had  reserved  and  exercised  a  power 
of  sale.  "Here  Nicholas  brought  the  furniture  from  his 
former  residence,  and  he  alone,  from  the  time  of  the  as- 
signment until  the  seizure,  exercised  acts  of  ownership  over 
it.  Indeed,  it  could  not  be  predicted  from  appearances 
that  any  other  jierson  than  himself  was  the  proprietor  of 
the  property." 

§  14.   Cases   supposed  to   be   antagonistic  ;    Benton  v. 

Thornliill,  — There  are  a  few  cases  to  be  found  in  the  Eng- 
lish reports  which  have  been  sometimes  taken  as  authorities 
against  the  proposition  supported  by  the  preceding  cases. 

1  1  Niel  Gow,  33  (1818). 

28 


DOCTRINE    OF    THE    ENGLISH    CASES.  §     15 

One  of  these  is  Benton  v,  Thornhill.^  But  in  this  case, 
there  was  conflicting  evidence  on  the  point  in  question, 
which  was  left  to  the  jury  ;  they  were  told  that  an  intent  to 
reserve  any  benefit  to  the  grantor  would  avoid  the  convey- 
ance ;  there  was  not  a  complete  and  vmdisputed  possession 
by  the  debtor,  the  agent  of  the  creditor  having  been  in  at 
least  partial  possession ;  and  the  verdict  in  favor  of  the 
creditor  was  taken  by  the  court  (Gibbs,  C.  J.),  as  sustain- 
ing the  possession  of  the  mortgagee,  and  negativing  the  idea 
that  he  had  assented  to  any  acts  of  ownership  on  the  part 
of  the  debtor,  or  that  there  was  any  reservation  for  his 
benefit.  The  case  is,  therefore,  in  harmony  with  rather 
than  in  opposition  to  the  doctrine  in  question. 

§  15.  Biicknall  v.  Roistoii     of    doubtful  authority. — 

Bucknall  v.  Roiston  -  was  a  case  of  a  cargo  of  goods,  taken 
out  on  shipboard  for  the  purpose  of  foreign  trade,  which 
was  pledged  to  a  creditor,  not  only  by  a  bill  of  sale  of  the 
goods,  and  of  "  the  produce  and  advantage  that  should 
be  made  thereof,"  but  also  by  a  bottomry  bond  for  three 
years  ;  and  the  chancery  court,  on  the  theory  of  a  trust 
for  the  faithful  accounting  of  the  goods  and  profits  thereof , 
held  the  conveyance  good  as  against  a  creditor  by  a  prior 
judgment ;  and  gave  the  bond-creditor  an  account  of  the 
goods  that  were  brought  home,  though  the  goods  had  re- 
peatedly changed  form,  the  original  stock  having  all  disap- 
peared. In  the  light  of  more  modern  decisions,  a  contrary 
conclusion  might  well  have  been  reached.  This  case  is  re- 
ferred to  by  Buller,  J.,  in  Edwards  v.  Harben,  as  having 
been  decided  alone  on  the  ground  of  the  trust ;  and  it  may 
be  read  between  the  lines  of  the  latter  decision,  that  Buck- 
nall V.  Roiston  is  not  to  be  regarded  as  an  adverse  author- 
ity.  The  same  may  be  observed  in  the  opinions  of  the 
judges  in  Ryall  v.  Rowles,  Burnet,  J.,  saying  of  the  Lord 

1  7  TauHton,  149  (1816). 

'  Prec.  in  Chancery,  285  (1709). 

29 


§16         FRAUDULENT  MORTGAGES  OF  MERCHANDISE. 

Chancellor's  opinion  in  Bucknallt.  Roiston:  "His  words 
arc,  '  That  here  was  no  possession  calculated  to  acquire  a 
false  credit,'  which  is  a  plain  declaration  that  a  possession 
so  calculated  as  to  acquire  a  false  credit,  would  have  made 
the  transaction  void."  ^ 

§  16.  Reserved  power  of  sale  an  element  in  eight 
cases.  — It  will  be  observed,  then,  that  there  are  eicjht  Eng:- 
lish  cases,  all  decided  prior  to  the  introduction  of  the  doc- 
trine in  question  into  this  country,  and  in  which  the  element 
existed  of  a  power  of  sale  or  disposition  reserved  to  the 
debtor;  and  that  this  element  was,  in  each  case,  acknowl- 
edged as  influential,  to  a  greater  or  less  extent,  indetermin- 
ino;  the  decision  of  the  court.  Whether  so  acknowledg-ed 
at  the  time  or  not,  it  is  plain  in  the  light  of  subsequent 
comment  on  these  cases,  to  be  hereafter  referred  to,  that 
this  element  in  them  was  the  controllino;  one.  Accordino^to 
well  settled  principles,  it  is  necessary,  in  considering  ques- 
tions of  law  as  illustrated  by  authority,  to  look  particularly 
to  the  facts  of  the  case  decided.  In  no  other  manner  can 
proper  distinctions  be  drawn,  or  proper  limitations  upon 
legal  rules  be  established.  Now,  that  jurists  are  generally 
agreed  that  retention  of  possession  by  a  mortgager  does 
not  alone  render  a  morto^ase  of  chattels  fraudulent,  it  is 
idle  to  cite  as  an  authority  for  such  a  proposition,  or  even 
as  a  case  which  was  formerly  taken  as  an  authority  for  it, 
any  of  these  English  cases  which  did  not  rest  upon  retention 
of  possession  alone,  but  which  was  distinguished  by  the  ele- 
ment of  a  reserved  power  of  sale  added  to  the  possession. 
This  element  is  plainly  found  in  Twyne's  Case  and  the  suc- 
ceedinsr  cases  above  cited.  The  conclusion  seems  inevitable 
that  these  cases  are  direct  authorities  in  support  of  the 
doctrine  of  Robinson  v.  Elliott,  as  a  common-law  doctrine, 
and  that  its  visible  origin  is  to  be  found  in  Twyne's  Case. 

1  1  Atk.  168. 

30 


DOCTRINE   OF   THE    ENGLISH   CASES.  §     17 

§  17.  Mere  retention  of  possession   unimportant. — It 

is  not  strange,  however,  that  American  courts  and  lawyers 
were  at  first  inclined  to  treat  Twyne's  Case,  Edwards  v. 
Harben,  and  kindred  cases,  as  authorities  on  the  question 
of  retention  of  possession  alone.  Neither  Twyne's  Case, 
nor  Edwards  ?;.  Harben,  rested  merely  on  possession ;  yet 
the  language  of  Buller,  J.,  in  the  latter  case,  plainly  leads 
to  a  supposition  that  this  was  really  the  point  decided.  So, 
also,  it  frequently  occurred,  that  in  considering  cases  where 
retention  of  possession  alone  was  the  feature  under  discus- 
sion, Twyne's  Case,  andjiotably  Edwards  v.  Harben,  were 
referred  to  as  holding  that  such  retention  of  possession 
alone  would  suffice  to  make  a  mortgao-e  fraudulent.  Taking 
the  expressions  of  Mr.  Justice  Buller,  in  the  last  named  case, 
as  exact  statements  of  the  legal  rule,  it  was  quite  natural, 
when  the  facts  of  any  new  case  indicated  the  necessity  of 
distinguishing  it  from  Edwards  v.  Harben,  to  resort  to  the 
expedient  of  establishing  exceptions  to  the  general  rule,  of 
which  exceptions,  as  before  stated,  Mr.  Co  wen  enumerated 
twenty-four.  The  controversy  thus  arose,  and  was  thus 
waged,  about  Edwards  v.  Harben,  in  misapprehension  of 
w^hat  now  seems  to  be  the  true  doctrine  of  that  case. 

There  appears,  nevertheless,  to  be  a  continuous  line  of 
English  decisions,  running  2J«*'2  2^«ss?t  with  those  above 
cited,  in  which  the  element  of  possession  alone  under  a 
chattel  mortgage  was  involved  and  was  distinctively  con- 
sidered. 

In  a  number  of  these  cases,  to  which  reference  will  now 
be  made,  it  w^as  distinctly  held,  as  a  common-law  rule, 
that  retention  of  possession  alone  did  not  render  such  a 
conveyance  fraudulent ;  and  this  without  either  overruling 
or  ignoring  Twyne's  Case.  Doubtless,  if  in  every  case  the 
distinction  had  been  carefully  drawn  between  retention  of 
possession  alone,  and  retention  of  possession  with  power  of 
sale  and  disposition,  and  if  the  court  had  explained  in  every 

31 


§  18    FRAUDULENT  MOKTGAOES  OF  MKKCHANDISi:. 

case,  that  in  one  of  these  classes  of  cases  the  conveyance 
would  be  held  conclusively  fraudulent,  while  in  the  other 
it  would  not  be  so  held,  neither  misunderstanding  nor  con- 
troversy upon  this  question  Avould  ever  have  arisen.  But 
courts  are  not  usually  so  astute  as  this  in  endeavoring  to  pre- 
vent misapprehensions  concerning  their  decisions.  It  is 
well  understood  that  the  influence  of  every  decision  is  to  be 
limited  by  the  facts  of  the  case  decided.  Students  of  the 
law  should  always  observe  this  rule  in  studying  cases  as 
authorities  ;  and  when  mistakes  or  misapprehensions  prevail, 
as  frequently  happens,  it  may  become  necessary  to  correct 
them  by  a  careful  review  of  the  authorities  in  the  light  of 
^.his  rule.  Turning,  then,  once  more  to  the  English  cases, 
ive  shall  find  very  considerable  authority  for  the  rule  that 
retention  of  possession  alone  did  not  at  common  law  render 
a  mortgage  of  chattels  or  other  conveyance  thereof  as  se- 
curity fraudulent  or  void. 

§  18.  Retention  of  possession  alone  not  conclusive  of 
fraud ;  Stone  v.  Grnbham.  —  The  earliest  case  to  be  re- 
ferred to  is  Stone  v.  Grubham,^  which  arose  soon  after 
Twyne's  Case.  Though  hardly  an  authority,  inasmuch  as 
the  conveyance  was  of  a  lease  for  years,  yet  the  case  indi- 
cates the  early  view  of  the  law.  The  grantor  had  made  a 
gift  to  the  grantee  of  all  his  goods  and  chattels,  including 
the  lease,  by  way  of  security,  but  continued  in  possession  of 
the  land,  the  lease  being  surrendered  to  the  grantee.  Sir 
Edward  Coke  and  his  associates  held  that  the  retention  of 
possession  by  the  grantor  would  not  be  considered  fraudulent 
except  upon  proof  that  it  was  done  to  defraud  and  deceive 
creditors.  The  language  of  the  court  implies  that  the  lease 
was  treated  as  a  chattel  interest,  and  the  case,  therefore,  has 
been  sometimes  regarded  as  an  authority  in  cases  involving 
chattels. 

1  2  Bulst.  225  (1615). 

32 


DOCTRINE    OF    THE    ENGLISH    CASES.  §     19 

§19.  Lord  Holt's  dictum  in  Meggot  v.  Mills .  —  Meg- 
got  V.  jVlilly,^  which  arose  in  1697,  was  a  case  where  the 
conveyance,  being  a  bill  of  sale  given  as  security,  covered 
only  the  household  furniture  of  an  inn.  The  grantor  re- 
tained possession,  but  there  was  no  power  of  sale  reserved. 
The  case  thus  presents  the  question  of  retention  of  posses- 
sion alone.  Lord  Holt,  C.  J.,  sustained  the  conveyance  as 
a  security,  though  apparently  with  some  doubts.  In  this 
case  the  secured  creditor  became  such  only  at  the  time  of 
and  in  connection  with  the  conveyance,  he  having  supplied 
the  money  with  which  the  debtor  purchased  the  furniture. 
It  was  upon  these  facts  particularly  that  Lord  Holt  sus- 
tained the  conveyance,  saying  :  "  If  these  goods  of  Wilson's 
had  been  assigned  to  any  other  creditor,  the  keeping  of  the 
possession  of  them  had  made  the  bill  of  sale  fraudulent  as 
to  the  other  creditors." 

This  indicates  plainly  the  opinion  of  Lord  Holt  that  such 
was  the  general  rule  of  law,  to  which  he  was  establishing  an 
exception. 

Twelve  years  later,  in  the  argument  of  Bucknall  v.  Rois- 
ton,  in  chancery,^  Sir  EdAvard  Northey  as  counsel  said : 
"It  has  been  ruled  forty  times, in  my  experience,  at  Guild- 
hall, that  if  a  man  sells  goods  and  still  continues  in  posses- 
sion as  visible  owner  of  them,  such  sale  is  fraudulent  and 
void  as  to  creditors,  and  that  the  law  has  been  always  so 
held."  The  singular  feature  of  this  matter  is,  that  no  case 
which  supports  the  dictum  of  Lord  Holt  or  the  argument  of 
Sir  Edward  Northey  has  ever  been  found  in  the  reports. 

If  this  doctrine  w^as  ever  seriously  entertained,  it  was 
evidently  for  but  a  brief  period.  Mr.  Justice  Burnet  said, 
among  other  things,  in  Ryall  v.  Rowles,^  in  1749:  "Pos- 
session is  no  otherwise  a  badge  of  fraud,  unless  as  calcu- 
lated to  deceive  creditors." 

1  1  Lord  Raym.  286. 

2  Prec.  in  Chancery,  285  (1709). 

3  1  Yes.  sr.,  at  p.  SCO. 

3  33 


§  20    FRAUDULENT  MORTGAGES  OF  MERCHANDISE. 

§  '20.  Views  of  Lord  Mansfield  in  Cadogan  v.  Ken- 
nctt. — In  Cadogan  v.  Kcnnett,^  decided  in  177G,  but  not 
involving  the  precise  question,  Lord  Mansfield  expressed 
his  views  on  the  general  subject  as  follows:  "There  are 
many  things  which  are  considered  as  circumstances  of 
fraud.  The  statute  says  not  a  word  nhout  2iOSsession .  But 
the  law  says,  if  after  a  sale  of  goods,  the  vendee  continue 
in  possession,  and  appear  as  the  ^7'.s?'6/e  owner,  it  is  evidence 
of  fraud;  but  it  is  not  so  in  the  case  of  a  lease,  for  that 
does  not  pass  by  delivery.  *  *  *  Xhe  question,  there- 
fore, in  every  case  is,  whether  the  act  done  is  a  bona  Jide 
transaction,  or  whether  it  is  a  trick  and  contrivance  to  de- 
feat creditors.  If  there  be  a  conveyance  to  a  trustee  for 
tliehenefil  of  the  debtor,  it  is  fraudulent." 

§  21.  Lord  Eldon's  Views ;  Biiller's  synopsis  of  TA^yne's 
Case.  —  Kidd  v.  Rawlinson^  was  a  controversy  over  certain 
household  furniture,  under  the  following  circumstances. 
The  plaintiff  advanced  money  to  one  Aburn  with  which  to 
purchase  the  furniture,  and  took  from  him  a  bill  of  sale 
therefor  as  security,  but  left  Aburn  in  possession.  The 
defendant,  a  creditor  of  Aburn,  procured  from  him  a 
second  bill  of  sale,  and  took  possession  of  the  goods,  though 
with  notice  of  plaintiff's  prior  title;  and  the  defendant 
having  sold  the  goods,  plaintiff  sued  him  for  their  value 
and  recovered  judgment.  Lord  Eldon,  in  sustaining  the 
verdict,  said :  "It  appears  to  me  that  this  does  not  fall 
within  the  principle  of  Twyne's  Case,  and  the  other  cases 
on  the  subject."  He  also  cited,  with  his  sanction,  the 
following  passage  from  Buller's  Nisi  Prius,  which  is  that 
author's  brief  synopsis  of  the  entire  doctrine  of  Twyne's 
Case:  — 

"A.,  being  indebted  to  B.  in  £400,  and  to  C.  in  £200, 
C.  brings  debt,  and  hanging   the  writ,  A.  makes  a  secret 

1  2  Cowper,  432.  ^  2  Bos.  &  Pul.  59  (1800). 

34 


DOCTRINE    OF    THE    ENGLISH    CASES.  §    22 

<;onve3"ance  of  all  his  goods  and  chattels  to  B.  in  satis- 
faction of  his  debt,  but  continues  in  possession,  and  sells 
some,  and  sets  his  mark  on  other  sheep;  and  it  was  holden 
to  be  fraudulent  within  this  act:  (1)  because  the  gift  is 
general;  (2)  the  donor  continued  in  possession  and  used 
them  as  his  own;  (3)  it  was  made  pending  the  writ,  and  it 
is  not  within  the  proviso,  for  though  it  is  made  on  a  good 
consideration,  yet  it  is  not  bona  fide. 

"  But  yet  the  donor  continuing  in  possession,  is  not  in  all 
cases  a  mark  of  fraud  ;  as  where  a  donee  lends  his  donor 
money  to  buy  goods,  and  at  the  same  time  takes  a  bill 
of  sale  of  them  for  securing  the  money."  ^ 

§  22.  Lord  Eldon's  further  views  of  Twyne's  Case. — 

In  Lady  Arundel  v.  Phipps,-  Lord  Eldon  gave  further 
expression  to  his  views,  as  follows:  "Upon  this  case,  I 
believe,  my  decision  in  the  Court  of  Common  Pleas  was 
disputed.^  My  opinion  upon  the  trial  of  that  cause  was, 
that  possession  is  only  prima  facie  evidence  of  fraud ;  and 
as  that  property  could  not  be  reached  by  bankruptcy,  and 
the  possession  was  according  to  the  deed,  which  created 
the  title,  and  the  title  was  publicly  created,  that  was  not  a 
fraudulent  possession  against  the  creditors  in  general;  and, 
upon  a  motion  for  a  new  trial,  the  court  agreed  with  me. 
With  great  deference,  if  Lord  Ellenborough  thinks  other- 
wise, I  am  at  present  of  the  same  opinion.  *  *  *  Xhe 
mere  circumstance  of  possession  of  chattels,  however  fa- 
miliar it  may  be  to  say  that  it  proves  fraud,  amounts  to  no 
more  than  that  it  is  j^rzwia  facie  evidence  of  property  in 
the  man  possessing,  until  a  title,  not  fraudulent,  is  shown, 
under  wiiich  that  possession  has  followed.  Every  case, 
from  Twyne's  Case  downward,  supports  that,  and  there 

1  BuUer's  Nisi  Prius,  4th  ed.,  1785. 

2  lOVes.  139  (1804). 

^  Kidd  V.  Rawlinson,  supra. 

35 


§  23    FRAUDULENT  MORTGAGES  OF  MERCHANDISE. 

was  no  occasion  othenvise  for  the  statute  of  21  Jiic.  1,  c. 
19,  s.  11." 

In  this  language,  Lord  Eldon  has  been  by  English  com- 
mentators understood  (and  with  evident  correctness)  to 
refer  to  his  opinion  in  Kidd  v.  Rawlinson.  This  is  further 
apparent  from  what  this  distinguished  jurist  said,  a  year 
later,  in  Ex  parte  Williams,^  manifestly  in  continuation 
of  the  same  line  of  thought,  and  with  the  view  of  aiding 
in  the  removal  of  the  prevalent  misunderstandings  and 
clearing  up  the  existing  doubts  on  the  subject.  "  Having 
had  occasion  lately  to  look  into  that  doctrine  from  TAvyne's 
Case,  I  think  in  modern  times  a  tendency  has  prevailed  to 
give  more  effect  to  the  actual  7naniial  jjossession,  as  evidence 
of  fraud,  than  Twyne's  Case  toas  intended  to  sanction.^' 

§  23.  L/ord  EUenborough's  views.  —  In  Dewey  v.  Bayn- 
tun,'^  the  same  conveyance  was  under  consideration  which 
was  involved  in  Arundel  v.  Phipps.  A  verdict  for  plaintiff 
had  been  found  on  these  circumstances  :  "  (1)  The  previous 
embarrassment  of  the  husband  ;  (2)  the  want  of  notoriety 
of  the  conveyance  at  the  time;  (3)  the  want  of  an  inven- 
tory; (4)  the  continuance  of  the  husband's  possession, 
though  consistent  with  the  deed,  yet  without  notice  of  the 
change  of  property;  and  (5)  the  appropriation  by  the  hus- 
band of  a  part  of  the  money  raised  by  the  trustees  to  his 
own  use,  without  objection."  In  setting  aside  this  verdict 
and  granting  a  new  trial ,  Lord  Ellenborough  said  :  ' '  Indeed , 
if  the  several  facts  upon  Avhich  this  alleged  inadequacy  is 
founded  had  been  given  in  evidence  to  the  jury,  viz.,  the 
annual  value  of  the  estates,  the  age  of  Lord  Arundel,  the 
value  of  Lord  Arundel's  life  interest  therein,  and  the 
value  of  the  goods,  it  would  have  raised  a  most  im- 
portant question,  whether  an  assignment,  by  the  terms  of 
which  the  creditors  of  the  party  assigning  such   property 

1  11  Ves.  3  (1805).  ''  6  East,  257  (1805). 

36 


DOCTRINE   OF   THE   ENGLISH    CASES.  §    25 

were  to  be  so  materially  prejudiced,  was  not  a  covinous  act 
between  the  parties  thereto,  and  on  that  account  void  as 
against  creditors,  both  at  common  law  and  within  the 
statute  13Eliz." 

In  Hoffman  v.  Pitt,^  the  question  was  whether  it  was 
fraudulent  for  the  purchaser  of  household  furniture  at 
a  sheriff's  execution  sale,  who  had  left  the  same  in 
the  debtor's  house  subject  to  his  use,  to  pay  off  a 
second  execution,  and  then  take  a  second  bill  of  sale  from 
the  debtor,  still  leaving  the  goods  in  the  house  ;  and  Lord 
Ellenborough  said:  "The  not  taking  possession  was  in 
some  measure  indicative  of  fraud,  but  was  not  conclusive." 

§  24.  VieAvs  of  Chief  Justice  Mansfield  in  Steel  v. 
Brown. — In  1808,  in  the  Common  Pleas,  the  precise  ques- 
tion came  before  Sir  James  Mansfield,  chief  justice,  in 
Steel  V.  Brown.-  This  case  involved  a  bill  of  sale  of  "fix- 
tures and  goods  "  in  a  public  house,  the  grantor  retaining 
possession,  but  not  reserving  a  power  of  sale  or  disposition. 
The  chief  justice,  in  sustaining  the  conveyance,  said  :  "  No 
case  has  decided  that  a  bill  of  sale  unaccompanied  by  the 
possession  may  not  under  certain  circumstances  be  fair  and 
valid." 

§  25.  Judicial  doubts  ;  Jezeph  v.  Ingram,  and  Woode- 
man  V.  Baldock. — Jezeph  v.  Ingram^  was  a  conveyance 
of  farm  stock,  utensils,  produce,  etc.  The  grantor  re- 
mained in  possession  and  continued  to  conduct  the  business 
of  the  farm,  but  for  the  benefit  of  the  grantee.  The  con- 
veyance being  attacked,  was  sustained  by  the  court,  but  with 
the  expression  of  some  doubts  as  to  whether  they  were 
not  "ripping  up  old  cases"  and  "removing  the  land- 
marks." 

1  5  Esp.  22  (180G). 

2  1  Taunt.  381. 

8  8  Taunt.  838 ;  1  Moore,  189  (1817). 

37 


§  27    FRAUDULENT  MORTGAGES  OF  MERCHANDISE. 

In  Wooderman  r.  Baldock^  the  sole  evidence  of  fraud, 
outside  of  the  fact  of  the  use  of  the  goods  by  the  grantor, 
was  that  the  tiustees  had  advertised  the  goods  for  sale  as 
the  goods  of  the  grantor;  but  as  the  judges  were  of  opin- 
ion that  there  was  nothing  in  these  circumstances  inconsis- 
tent with  the  trust  deed,  the  verdict  of  a  jury  in  favor  of 
the  transaction  was  sustained. 

§  26.  Judicial  doubts;  Steward  v.  Lombe. — Steward 
V.  Lombe-  was  a  case  of  a  mortgage  on  land  on  which  was 
a  windmill,  specifically  conveyed  in  the  mortgage.  The 
w^indmill  having  remained  in  the  mortgager's  possession, 
was  levied  on  at  the  instance  of  his  execution  creditor. 
The  mortsao;er  having  the  right  to  remove  the  mill  from  the 
land  at  pleasure,  it  was  held  that  the  mill  was  under  these 
circumstances  a  chattel.  But  the  possession  of  the  mort- 
gager was  held  not  to  invalidate  the  mortgage  as  to  the  mill ; 
actual  change  of  possession  was  held  unnecessary  under  the 
circumstances  of  the  case,  even  had  it  been  more  feasible  ; 
the  court  did  not  consider  an  actual  change  of  possession 
requisite  in  all  cases  of  conveyance  of  chattels  as  security, 
and  expressed  doubts  whether  such  was  to  be  considered 
the  proper  doctrine  to  be  drawn  from  Edwards  v.  Harben, 
which  was  pressed  upon  the  court  as  an  authority  for  that 
view. 

§  27.  Lord  Tenterden's  views. — Latimer  v  Batson^ 
was  a  conveyance  of  household  furniture,  farming  stock, 
and  other  property,  including  wine,  made  by  a  sheriff  on 
execution  sale.  The  purchaser  from  the  sheriff  put  his 
own  man-servant  in  nominal  possession  of  the  property, 
but  left  it  virtually  in  the  hands  of  the  Duke  of  Marlborough, 
the  execution  debtor,  who  was  allowed  to  use  the  goods  at 

1  8  Taunt.  676  (1819). 

2  1  Brod.  &  Bing.  506  (1820). 

3  4  B.  &  C.  652  (1825). 

38 


DOCTRINE    OF    THE    ENGLISH    CASES.  §    28 

pleasure.  The  transaction  was  sustained  by  the  court ;  the 
case  being  distinguished  from  Wordall  v.  Smith, ^  which  was 
distinctly  approved.  Abbott,  C.  J.,  said:  "I  perfectly 
agree  that  possession  is  to  be  much  regarded  ;  but  that  is 
with  a  view  to  ascertain  the  good  or  bad  faith  of  the  trans- 
action." No  reference  was  made  by  the  court  to  the  wine 
which  was  included  in  the  purchase  ;  a  conspicuous  silence, 
which  the  impartial  student  of  the  law  is  inclined  to  ascribe 
to  the  influence  of  the  great  name  of  Marlborough. 

But  the  views  of  this  eminent  judge  on  the  question  of 
possession  alone  were  again  unequivocally  expressed,  during 
the  same  year,  in  Eastwood  v.  Brown. ^  In  this  case,  a  debtor 
had  sold  and  transferred  to  one  of  his  creditors  his  house- 
hold furniture,  retaining  the  occupation  and  possession  of 
his  house  and  the  furniture  as  before  ;  and  Abbott,  Lord 
C.  J.,  held  that  this  did  not  furnish  conclusive  evidence  of 
fraud,  and  left  it  to  the  jury  to  determine  the  question  of 
fraudulent  intent. 

§  28.  The  question  of  the  effect  of  possession  alone 
settled  in  Martindale  v.  Booth ;  Edwards  v.  Harben  dis- 
tinguished.—  In  Martindale  v.  Booth,^  there  are  evidences 
that  the  judicial  mind  in  England  had  at  last  settled  down 
upon  the  proposition  that  retention  of  possession  alone 
was  not  sufficient  to  invalidate  a  mortgage  or  conveyance 
of  chattels.  The  case  was  a  bill  of  sale  of  furniture  and 
fixtures  in  a  tavern,  as  security,  with  a  reservation  of  the 
possession  and  use,  which,  of  course,  under  the  circum- 
stances, did  not  imply  a  power  of  sale  or  disposition,  or 
any  other  reservation  by  the  grantor  inconsistent  with  the 
conveyance  as  a  security.  Lord  Tenterden  and  his  asso- 
ciate judges  agreed  that  the  conveyance  was  valid.     Lord 

1  1  Camp.  332 ;  sect.  11,  supra. 
■^  1  Kyan  &  M.  312  (1825). 
»  8  B.  &  Ad.  498  (1832), 

39 


§  28    rUAUDULENT  MOUTGAGE8  OF  MERCHANDISE. 

Tenterden's  opinion  was  substantially  the  same  as  that  given 
by  him  in  Latimer  v.  Batson  and  Eastwood  v.  Brown;  all 
the  other  judges  discussed  the  preceding  authorities  with 
the  evident  view  of  drawing  such  distinctions  as  to  deduce 
from  them  a  harmonious  general  rule.  Attention  was  par- 
ticularly directed  to  the  circumstance  that  the  case  of 
Edwards  v.  Harben  had  been  frequently  misunderstood. 
Reference  was  made  to  the  denial  of  Dallas,  J.,  in  Jezeph 
V.  Ingram,  that  Edwards  v.  Harben  lays  down  any  general 
rule  that  want  of  possession  alone  will  render  a  mortgage 
of  chattels  fraudulent.  Parke,  J.,  for  himself,  referred  to 
the  statement  of  Buller,  J.,  in  the  last  named  case,  that, 
*'if  there  is  nothing  but  the  absolute  conveyance  without 
possession,  that,  in  point  of  law,  is  fraudulent,"  as  a  mere 
dictiun.  This  plainly  implies  that  the  question  of  posses- 
sion alone  was  not  the  one  involved  in  Edwards  v.  Harben, 
and  that  the  real  point  in  that  case  was  whether  possession, 
with  a  power  of  disposition  reserved,  would  be  considered 
fraudulent.  It  thus  appears  that  Edwards  v.  Harben  is 
understood  in  England  as  an  authority  for  the  doctrine 
of  Robinson  v.  Elliott,  namely,  that  the  retention  of  pos- 
session under  such  conveyances,  when  combined  with  an 
unrestricted  power  of  sale  or  disposition,  is  wholly  incon- 
sistent with  the  conveyance  as  a  security,  and  is  fraudulent 
and  invalid.  But,  on  the  other  hand,  Edwards  v.  Harben 
should  never  have  been  taken  as  an  authority  for  the 
proposition  that  retention  of  possession  alone  will  neces- 
sarily invalidate  such  a  conveyance. 

Accordingly,  in  Hunter  v.  Corbett,^  which  was  a  contro- 
versy over  a  bill  of  sale  of  furniture  in  an  inn,  given  as  a 
mortgage,  the  vendor  remaining  in  possession,  but  without 
any  power  of  sale  or  disposition,  the  case  was  treated  as 
turning  on  fraudulent  intent ;  and  it  was  said,  as  to  the 

1  7  Up.  Can.  Q.  B.  75  (1849). 
40 


DOCTRINE    OF    THE    ENGLISH    CASES.  §    29 

retention  of  possession,  "that  has  long  been  held  not  to 
be  an  absolutely  conclusive  proof  of  fraud,  but  only  to 
furnish  evidence  of  it." 

§  29.  Edwards  v.  Harben  further  explained  in  Mac- 
dona  V.  Swiney.  —  That  the  view  here  taken  of  the  case  of 
Edwards  v.  Harben  is  the  correct  one,  and  that  it  is  a  mis- 
take to  refer  to  that  case  as  an  authority  for  the  doctrine 
that  retention  of  possession  alone  renders  a  conveyance  of 
chattels  fraudulent  in  law,  maybe  further  seen  by  reference 
to  the  case  of  Macdona  v.  Swiney.^  In  that  case  the  plain- 
tiff, having  purchased  at  an  execution  sale  certain  goods 
levied  on  as  the  property  of  his  debtor,  left  the  goods  for 
some  months  in  the  possession  of  the  latter,  when  they 
were  again  levied  on  at  the  instance  of  a  creditor  by  a  judg- 
ment junior  to  the  first  execution,  the  date  of  the  indebted- 
ness to  the  junior  creditor  not  appearing.  The  Court 
of  Queen's  Bench  declined  to  declare  the  transaction  fraudu- 
lent in  law,  on  the  authority  of  Edwards  v.  Harben.  That 
case,  as  well  as  Twyne's  Case,  was  distinguished  from  the 
one  at  bar  by  the  circumstance  before  mentioned,  that  the 
debtor  remained  not  only  in  the  possession,  but  the  contro] 
and  disposition  also  of  the  goods.  The  arguments  of  coun- 
sel who  attacked  the  conveyance  in  Edwards  v.  Harben 
were  especially  referred  to,  as  indicating  the  drift  of  that 
case ;  and  the  absence  of  any  jus  disponendi  in  the  case  at 
bar  was  pointed  out.  The  statement  of  Buller,  J.,  that  his 
brethren  and  himself  were  agreed  in  that  case,  that  "  unless 
possession  accompanies  and  follows  the  deed,  it  is  void," 
was  construed  to  refer  to  nothing  other  than  possession  un- 
der the  circumstances  of  that  case,  where  possession  implied 
disposal  also.  The  like  inference  was  drawn  from  the  de- 
cision of  the  Court  of  Kino-'s  Bench  in  Jarman  v.  \Yoollo- 


»  8  Irish  Law  Kep.  73  (1853). 

41 


§  30  ,  FRAUDULENT  MORTGAGES  OF  MERCHANDISE. 

ton^  and  Haselinton  v.  Gill ,'^  each  of  which  cases  involved 
and  sustained  an  ante-nuptial  settlement  of  a  wife's  stock 
in  trade,  etc.,  which  was  attacked  in  each  case  by  creditors 
of  the  husband,  on  the  ground  of  the  possession  of  the  lat- 
ter; Buller,  J.,  who  sat  in  both  cases,  saying  in  one,  that 
"  possession  alone  is  not  evidence  of  fraud  ;  the  transaction 
must  be  shown  to  be  fraudulent  from  other  circumstances  ; 
if  the  possession  be  inconsistent  with  the  conveyance,  that 
is  evidence  of  fraud;  "  and  in  the  other,  "  it  is  sufficient  to 
say  that  the  husband  had  not  the  order  and  disposition  of 
this  property  ?(Ji!7/i  the  consent  of  the  real  oivner;  the  trustee 
was  the  legal  owner." 

§  30.  Late  English  cases  ;  the  question  of  power  of 
sale  not  considered.  —  No  contrary  view  is  disclosed  in  the 
late  English  cases.  The  precise  question  has  not  since  been 
considered  by  the  courts  in  any  reported  case,  though  occa- 
sionally such  facts  have  been  presented  as  would  have  war- 
ranted a  discussion  of  it.  Gale  v.  Burnell^  was  a  case  of  a 
conveyance  of  furniture  and  farming  stock,  given  as  secur- 
ity for  debt,  which  was  attacked  by  an  execution  creditor 
of  the  grantor.  The  deed  was  held  valid  and  operative  as 
to  the  property  on  hand  when  it  was  executed,  but  not  as  to 
after  acquired  property.  The  principal  question  considered 
was,  whether  the  deed  operated  as  a  present  conveyance  of 
the  property.  The  stipulation  in  it  that  the  grantor  might 
"make  use  of"  the  property,  was  held  equivalent  to  a 
license  to  consume  such  articles  as  were  perishable,  if  any  ; 
but  this  license  was  passed  by  as  not  defeating  the  original 
grant,  or  implying  any  power  of  disposition  for  the  benefit 
of  the  grantor;  so  the  question  of  a  reservation  to  his  use, 
or  of  any  other  fraudulent  aspect  of  the  transaction,  was 

1  3  TermR.  018  (1790). 

■'  Id.  620. 

3  7  Q.  B.  850  (1845). 

42 


DOCTRINE    OF    THE   ENGLISH   CASES.  §    30 

not  mooted.  Graham  v.  Chapman  ^  was  a  conveyance  by  a 
trader  of  all  his  tangible  property,  including  his  stock  in 
trade,  to  secure  one  creditor  ;  and  it  being  a  sweeping  con- 
veyance, the  execution  of  it  was  held  an  act  of  bankruptcy, 
which  was  the  question  at  issue.  The  minor  question  of  a 
reserved  power  of  sale,  which  might  possibly  have  arisen  in 
view  of  the  trader's  retained  possession  and  control  under 
the  circumstances  of  the  case,  for  several  months,  received 
no  attention.  Upon  the  more  general  question  it  was  said  : 
"  Every  person  must  be  taken  to  intend  that  which  is  the 
necessary  consequence  of  his  own  act ;  and  if  a  trader  make 
a  deed  which  necessarily  has  the  effect  of  defeating  or  de- 
laying his  creditors,  he  must  be  taken  to  have  made  the 
deed  with  that  intent."  And  so  in  Spencer  v.  Slater,^  where 
an  msolvent  trader  made  a  general  assignment  for  creditors, 
to  trustees  who  were  to  carry  on  the  business,  but  no 
creditors  were  to  receive  dividends  who  did  not  affirmatively 
assent  to  the  conveyance,  this  was  held  to  hinder  and  delay 
creditors,  and  therefore,  to  be  fraudulent  and  void  under 
the  common  law,  without  reference  to  the  rules  in  bank- 
ruptcy cases.  In  Ex  parte  Games ,^  where  a  farmer  had  as- 
signed to  one  creditor,  by  way  of  mortgage,  all  his  house- 
hold furniture,  "  stock  in  trade,"  and  crops  and  implements 
on  his  farm,  the  mortgager  to  remain  in  possession  until 
demand  of  payment,  and  the  mortgage  to  cover  such  goods 
as  might  be  "  substituted  in  lieu"  of  those  conveyed,  it 
was  charged  that  this  mortgage  was  fraudulent  as  to  other 
creditors  under  the  statute  of  Elizabeth ;  and  the  chief 
judge  in  bankruptcy  held  it  to  be  so,  because  it  necessarily 
hindered  and  delayed  creditors.  In  the  chancery  division  of 
the  High  Court,  on  appeal,  the  contrary  view  was  taken  that 
the  transaction  was  merely  an  ordinary  and  lawful  prefer- 

1  12  C.  B.  (74  E.  C.  L.)  85  (1852). 

2  L.  K.  4  Q.  B.  D.  13  (1878). 
»  L.  R.  12  Ch.  D.  314  (1879). 

43 


§  30    FRAUDULENT  MORTGAGES  OF  MERCHANDISE. 

ence  of  a  particular  creditor;  and  without  any  consideration 
of  the  power  of  sale  in  the  mortgager  as  a  reservation  for 
his  own  benctit  inconsistent  with  the  security,  the  point  was 
dismissed  with  the  remark,  that  this  provision  was  but  a 
mode  by  which  the  mortgagee  secured  the  substitution  of 
new  chattels  in  the  place  of  old  ones.  The  High  Court 
could  not  "  see  any  fraud  in  that,"  nor  did  it  think  the 
conveyance  was  in  any  manner  a  cloak  for  retaining  a 
benefit  to  the  grantor,  because  there  did  not  appear  to  be 
any  fraudulent  intent  in  the  case.  Fraud  in  the  transaction 
was  considered  solely  as  turning  on  intent,  and  the  question 
of  the  operation  of  the  power  of  sale,  as  involving  a  necessar- 
ily fraudulent  tendency,  was  not  argued  or  considered.  It 
should  be  observed  that  the  mortgagee  in  this  case  had 
taken  possession  of  the  property  before  the  controversy 
arose. 

In  the  two  recent  cases  of  Ex  parte  Popplewell  ^  and  Ex 
parte  BoUand,^  the  question  may  perhaps  have  been  fairly 
involved,  though  the  meagre  report  of  the  facts  leaves  this 
doubtful.  In  each  case  the  debtor  had  made  a  conveyance 
of  goods  and  chattels,  including  what  is  styled  "  stock  in 
trade."  In  the  first  named  case,  the  debtor  had  been  car- 
rying on  the  business  of  manufacturing  mantles,  and  in  the 
last  case  that  of  brewer;  and  in  each  case  he  retained  pos- 
session until  be  became  bankrupt.  Such  a  conveyance  by  a 
brewer  would  seem  by  implication  to  reserve  to  him  the 
right  of  selling  the  property  ;  though  in  the  case  of  a  man- 
tle manufacturer,  this  implication  would  not  be  so  clear, 
and  it  might  well  bo  that  no  power  of  sale  was  contem- 
plated. But  the  question  seems  not  to  have  been  raised  or 
considered.  In  each  case,  the  trustee  in  liquidation  applied 
for  an  order  declaring  the  conveyance  void  as  against  him, 
but  urging  as  the  principal  ground  that  the  consideration 

1  21  Ch.  D.  73  (1382).  '  21  Ch.  D.  543  (1882). 

44 


DOCTRINE    OF    THE    ENGLISH    CASES.  §    31 

had  not  been  truly  stated  therein,  and  making  no  mention 
of  any  power  of  sale  reserved  to  the  grantor,  if  such  there 
were.  The  cases  are  considered  in  much  the  same  manner 
as  if  the  contest  had  been  between  the  parties  themselves, 
or  as  if  the  trustee  merely  stood  in  the  shoes  of  the  grantor 
in  the  conveyance. 

§  31.   Late  English  cases  ;  the  question  not  involved. — 

Three  cases  were  heard  and  decided  in  1880,  involving 
conveyances  similar  in  their  nature,  and  which  have  been 
sometimes  supposed  to  present  a  variation  of  this  question. 
In  National  Mercantile  Bank  v.  Hampson,^  the  judges  of 
the  Queen's  Bench  Division  held  that  where,  under  a  bill 
of  sale  of  growing  crops  on  farming  lands,  the  grantor  is 
allowed  "  to  hold  himself  forth  as  having  not  only  the  pos- 
session, but  the  property  in  the  same,"  he  has  an  implied 
license  to  sell  the  crops,  and  a  sale  of  wheat  by  him  to  a 
third  party  passes  the  title,  so  that  the  grantees  in  such  bill 
of  sale  can  sustain  no  action  against  the  purchasers  for 
conversion  of  the  wheat.  A  similar  question  arose  in 
Walker  v.  Clay,-  in  the  Common  Pleas  Division  of  the 
High  Court,  where  the  grantor  in  a  similar  bill  of  sale, 
covering,  among  other  things,  a  "stock  in  trade,"  sold  a 
pony  w^hich  was  included  in  the  conveyance,  and  it  was 
held  that  his  vendee  acquired  title  as  against  the  grantee 
in  the  bill  of  sale,  and  that  the  case  was  undistinguish- 
able  from  Bank  v.  Hampson.  These  cases  proceed  on  the 
familiar  principle  that  every  such  conveyance,  though  it 
might  have  been  in  a  proper  case  declared  fraudulent  as  to 
creditors,  is  good  between  the  parties.  The  only  question 
considered  in  either  is  the  proper  construction  of  the 
instrument,  from  which  it  appeared  that  the  grantee  had 
licensed   the    act  of   the   grantor  of   which   he   was    com- 

1  L.  R.  5  Q.  B.  Div.  177  (Feb.  1880). 

2  42  L.  T.  (n.  s.)  369  (Mar.  1880). 

45 


§  31    FRAUDULENT  MORTGAGES  OF  MERCHANDISE. 

plaining.  But  in  Taylor  v.  McKeand,^  a  careful  construc- 
tion of  the  bill  of  sale  led  to  a  different  conclusion.  Here 
the  grantor,  retaining  possession,  had  the  privilege  of  sell- 
ing the  goods  of  his  stock  in  trade  "  in  the  ordinary  way 
of  business."  He  having,  however,  sold  part  of  the  goods 
in  a  manner  which  the  jury  described  as  "  fraudulently, 
and  not  in  the  ordinary  course  of  his  business"  (that  is, 
fraudulently  as  to  the  grantee  in  the  bill),  it  was  held  that 
the  purchaser  from  the  grantof  acquired  no  title  as  against 
the  grantee,  though  he  made  his  purchase  in  good  faith 
and  Avithout  knowledge  of  the  fraud.  This  decision  was 
made  without  conflicting  with  the  case  of  Bank  v.  Hampson, 
from  which  it  is  plainly  distinguishable.  Payne  v.  Fern  '^ 
is  a  similar  case  to  Taylor  v.  McKeand,  and  is  decided 
similarly.  As  none  of  these  cases  exhibited  the  element 
of  a  complaint  by  a  creditor  of  the  grantor,  the  question 
of  fraud  upon  creditors  was  not  involved  in  any  of  them ; 
and  they  all  stand  in  perfect  harmony  with  Edwards  v. 
Harben  and  Robinson  v.  Elliott,  so  far  as  concerns  that 
question. 

Somewhat  similar  to  Bank  v.  Hampson  was  the  later  case 
of  Ex  parte  Allard,^  in  which  the  trustees  under  a  compo- 
sition in  bankruptcy  had  allowed  the  debtor  to  go  on  with 
the  business,  and  his  transfer  of  certain  book  debts  to  a 
third  party  as  security,  being  questioned,  was  sustained  as 
being  within  the  implied  authority  conferred  by  the  trus- 
tees. 

In  Ex  parte  Symmons,*  the  conveyance  had  reserved  a 
power  of  sale  to  the  grantor,  but  before  his  bankruptcy  he 
had  delivered  the  remainino;  o;oods  to  his  creditor  in  satis- 
faction  of  the  debt,  and  this  was  held  to  give  him  a  valid 

1  L.  R.  5  C.  P.  Div.  358  (May,  1880). 

2  L.  K  6  Q.  B.  Div.  620  (Feb.  1881). 
»  16  Ch.  Div.  505  (1881). 

*  14  Ch.  Div.  693. 
46 


UOCTKINE    OF    THE    ENGLISH    CASES.  §    32 

title  to  them.^  In  Ex  parte  Bayly ,^  where  the  same  ele- 
ment existed,  the  creditor  had  before  the  bankruptcy 
taken  possession  of  the  remaining  goods,  claiming  them 
under  his  conveyance,  and  it  was  held  that  an  injunction 
against  his  exercise  of  ownership,  pending  further  pro- 
ceedings, could  not  properly  be  granted »  The  principle 
under  consideration  was  notj  therefore,  involved  in  either 
of  these  cases.  Nor  did  it  enter  into  CraAvcour  v.  Salter,'^ 
the  decision  in  which  merely  sustained  a  conditional  transfer, 
or  letting  to  hire,  of  hotel  furniture,  as  retaining  title  in  the 
vendor. 

§  32.  The  doctrine  of  Twyne's  Case  superseded  In 
England. — The  desuetude  into  which  this  once  vigorous 
doctrine  of  Twyne's  Case  has  fallen  in  England,  is  doubt- 
less to  be  attributed  to  the  fact  that  it  has  been  so  supple- 
mented by  the  English  statutes  as  to  become  superseded. 
But  for  this  fact,  the  citations  made  from  the  English  cases 
show  that  this  doctrine  might  well  have  remained  as  still  an 
active  force  in  the  English  jurisprudence.  But  the  contin- 
ued and  general  operation  of  their  established  bankrupt  sys- 
tem draws  into  the  bankruptcy  courts  all  cases  involving 
this  question,  in  which  insolvency  has  occurred  and  has  been 
declared  ;  and  the  bankrupt  laws  render  void  all  such  con- 
veyances where  the  goods  remain  in  the  *'  order  and  dispo- 
sition "  of  the  bankrupt;  which  is,  pro  tanto,  a  statutory 
adoption  of  the  precise  principle.  Since  1854,  nearly  all 
such  cases,  not  within  the  rules  pertaining  to  bankruptcy, 
fall  under  the  statute  of  that  year,  or  the  subsequent  stat- 
ute of  1878,  which  require  the  registration  of  all  bills  of 
sale  and  conveyances  of  chattels  within  twenty-one  days 

^  See  sect.  144,  post,  for  a  reference  to  the  American  cases,  in  which  a  formal 
delivery  of  goods,  under  similar  circumstances,  was  advisedly  sustained. 
2  15  Ch.  Div.  223. 
»  18  Ch.  Div.  30. 

47 


§  32    FRAUDULENT  MORTGAGES  OF  MERCHANDISE. 

after  their  execution  ;  in  default  of  which,  the  conveyance 
is  to  be  void  as  to  all  goods  found  thereafter  in  the  "  appar- 
ent possession"  of  the  grantor.  So  many  of  the  cases 
which  arise,  therefore,  fall  under  these  statutory  provisions, 
that  it  is  of  rare  occurrence  that  a  case  is  presented  in  Eng- 
land, depending  for  its  decision  upon  the  ancient  common-law 
doctrine.  It  is  possible  that  a  case  may  arise,  where  a  trader 
not  declared  a  bankrupt  has  mortgaged  his  goods  by  a  regis- 
tered conveyance,  and  he  continuing  in  "  apparent  posses- 
sion," and  in  the  disposition  of  the  goods  by  sale,  the 
question  of  inherent  fraud  would  be  presented,  to  be  deter- 
mined, not  by  an  appeal  to  the  registration  acts,  but  by  a 
reference  to  the  rules  of  the  common  law,  irrespective  as  well 
of  these  acts  as  of  the  bankrupt  statutes.  The  English  courts 
investigate  even  registered  conversances  to  see  if  they  are 
fraudulent;  ^  and  they  declare  the  fraud  when  ascertained.'^ 
The  object  of  the  registration  acts  not  being  to  make  good 
a  conveyance  fraudulent  as  to  creditors,  even  "  the  most 
fraudulent  deed  will  be  well  registered,"  if  the  provisions 
of  the  act  are  complied  wnth.^  But  the  indications  are, 
from  such  cases  as  Gale  v.  Burnell  and  Ex  parte  Games ,^ 
that  the  Cjuestion  would  not  now  be  considered  in  England 
as  of  vital  importance. 

1  Darvill  v.  Terry,  6  H.  «&  N.  812  (18G1) ;  Mercer  v.  Peterson,  L.  R.  2  Exch. 
304  (1867). 

2  Oriental  Banking  Co.  v.  Coleman,  3  Giff.  11  (1861). 

3  Darvill  v.  Terry,  supra.     See  May  on  Fraud.  Conv.  120. 

48 


DOCTRINE    OF    THE    AMERICAN   MAJORITY. 


CHAPTER    III. 

THE  DOCTRINE  OF  THE  AMERICAN  MAJORITY, 

Section  So.  The  Doctrine  of  Twyne's  Case  vital  iu  America. 
34.  Tlie  doctrine  first  announced  in  Virginia. 
?5.  Tlie  doctrine  adhered  to  in  Virginia. 

3C.  Distinction  as  to  the  purpose  of  the  reserved  power;  agency 
for  the  trustee. 

37.  The  reserved  power  of  sale  ascertained  by  implication 

38.  Early  New  York  cases. 

31).  The  leading  case  of  Wood  v.  Lowry;  views  of  Bronson,  J. 

40.  Griswold  v.  Sheldon  explicit  and    not    doubtful  upon  this 

question. 

41.  The  doctrine  established  in  New  York. 

42.  Frequent  applications  of  it  in  practice. 

43.  The  doctrine  advisedly  adhered  to  and  clearly  explained. 

44.  The  doctrine  received  with  favor  in  New  Hampshire. 

45.  The  doctrine  adopted  and  applied. 

4(;.  Distinction  in  case  of  agency  for  mortgagee. 

47.  Collins  v.  Myers;  the  doctrine  illustrated  in  Ohio. 

48.  The  doctrine  adhered  to. 

49.  Distinction  in  case  of  agency  for  mortgagee. 

50.  The  doctrine  adopted  in  Minnesota;  registi'ation  of  instru- 

ment immaterial. 

51.  Transaction  not  validated  by  act  of  mortgagee  in  taking  pos- 

session of  goods. 

52.  The  doctrine  applied  in  Wisconsin;  intent  of  parties  imma- 

teriil. 

53.  Distinction  in  case  of  agency  for  mortgagee;  recent  cases. 

54.  The  doctrine  applied  in  Illinois;  registration  of  insti'umcut 

immaterial. 

55.  The  doctrine  adhered  to. 

5().  The  doctrine  as  applied  in  Missouri. 

57.  The  doctrine  adhered  to;  intent  of  parties  innnaterial. 

58.  Limitations  upon  the  application  of  the  rule. 

59.  Early  cases  in  Tennessee;  conflicting  decisions. 

60.  The  question  settled;  Bank  v.  Ebbert  and  later  cases. 

61.  Fraudulent  tendency  a  vicious  feature. 

62.  The  doctrine  advisedly  adopted  in  Mississippi. 

4  49 


§  3o    FRAUDULENT  M0RTGA(;E.S  OF  MERCHANDISE. 

Section  63.  Earlier  recognitions  of  the  propriety  of  the  rule. 

64.  The  doctrine  established  in  Mississippi. 

65.  The  doctrine  well  settled  in  Colorado. 

6G.  Oregon  adopts  the  doctrine ;   registration  of  instrument  im- 
material. 

67.  Reserved  power  of  sale  ]n-oven  by  implication  in  West  Vir- 

ginia. 

68.  The  doctrine  enforced  in  the  United  States  Circuit  and  Dis- 

trict courts. 

69.  The  fraud  illustrated  in  the  opinions  of  the  courts. 

70.  Other  cases  In  the  lower  United  States    courts;    the   doc- 

trine recoguized. 

71.  An  earlier  decision  by  the  Supreme  Court. 

72.  Antagonistic  cases  in  the  United  States  courts. 

73.  Mitchell  w.  Winslow  examined. 

74.  The  state  of  the  law  in  Indiana  prior  to  Robinson  v.  Elliott. 

75.  The  doctrine  of  Robinson  v.  Elliott  adopted  in  Indiana. 
70.  Doubtful  cases  in  Indiana. 

§  33.   The  doctrine  of  TwjTie's  Case  vital  in  America. — 

In  America  we  have  not,  as  in  England,  a  uniform  system, 
under  which  a  common-law  principle  may  be  completely 
supplanted  by  statutes,  so  as  to  lose  its  vital  force  and 
cease  to  influence  the  course  and  development  of  juris- 
prudence throughout  the  whole  land.  Not  only  have  we  a 
complicated  system,  under  which  various  independent  tri- 
bunals may  essay  to  administer  much  of  the  common  law, 
each  in  its  own  way,  so  that  even  an  established  bankru^Dt 
system  could  not  wholly  deprive  the  doctrine  under  discus- 
sion of  its  common-law  interest,  but  it  seems  doubtful 
whether  our  attempts  at  a  bankrupt  s^'stem  are  ever  to 
rise  above  the  level  of  experiments.  These  are  reasons 
which  have  given  the  common-law  questions  growing  out 
of  Twyne's  Case  a  practical  interest  in  America,  exceeding 
that  which  they  have  had  or  can  acquire  in  the  mother 
country. 

The  American  phases  of  the  doctrine  will  be  best  illus- 
trated by  a  careful  review  of  the  leading  cases  decided  in 
each  of  the  States  which  uphold  it ;   and  the  best  exposition 
50 


DOCTRINE    OF    THE    AMERICAN    MAJORITY.  §    34 

of  the  doctrine  will  doubtless  be  found  in  the  language 
of  the  judges  themselves.  -" 

Virginia. 

§  34 .   The  doctrine  first   announced   in  Virginia.  —  In 

this  review  of  the  American  cases,  those  from  Vin^-inia 
will  be  first  examined,  for  the  double  reason  that  the  doc- 
trine was  first  applied  in  that  State,  and  that  the  opinion 
in  which  it  was  announced  has  not  since  been  excelled  in 
the  terseness  and  perspicuity  with  which  the  fraudulent 
tendencies,  inherent  in  these  transactions,  are  exposed. 
This  is  the  case  of  Lang  v.  Lee,  decided  in  1825.^ 

The  deed  in  trust  conveyed  a  stock  of  goods,  stipulating 
that  "  the  goods  are  to  remain  in  the  possession  of  the  Laid 
Lee,  and  he  is  empowered  to  make  sales  of  them,  always 
accounting  with  the  trustee  herein  named,  if  required  to  do 
so."     Carr,  J.,  used  the  followins;  lano;uao;e  :  '^ 

"  Now,  I  ask,  what  possible  security  could  the  deed  fur- 
nish, encumbered  with  a  stipulation  like  this?  Is  it  not 
completely  a  felo  de  sef  A  security  is  taken  on  goods, 
and  they  are  left  in  the  possession  of  the  debtor  for  ten 
months,  with  a  power  to  sell  and  dispose  of  them  as  he 
may  think  proper;  no  check  whatever;  for  the  clause 
about  accounting  relates  only  to  the  money  for  which  he 
has  sold  the  goods.  Does  not  this  resolve  the  whole  matter 
into  personal  security  ?  And  is  the  debtor  more  bound  to 
account  for  the  money  than  he  was  before  for  the  debt? 
*  *  *  Suppose  he  had  sold  every  article  in  the  store  the 
next  day,  could  Lang  call  back  the  goods?  Certainly  not, 
for  he  had  given  Lee  express  power  to  sell.  As  a  security, 
then,  this  deed  was  naught.  What  other  possible  purpose 
could  it  have  than  to  delay,  hinder,  or  defraud  the  cred- 
itors of  Lee?  The  reason  of  Edwards  v.  Harben,  Ham- 
ilton V.  Russell,  etc.,  applies  strongly  to  this  case." 

1  3  Eand.  410.  s  p.  423. 

51 


§  34    FRAUDULENT  MORTGAGES  OF  MERCHANDISE. 

Again,^  "All  the  ca-ses  concur  in  the  position,  that  if 
the  power  retained  enable  the  grantor  to  defeat  the  pro- 
visions in  the  deed,  it  is  null  and  void;  and  this,  upon 
the  knoAvn  principles  of  the  common  law,  of  which  the 
statutes  on  the  subject  of  fraud  are  merely  declaratory. 
Now,  can  we  imagine  a  power  more  completely  adequate 
to  the  destruction  of  the  avowed  purpose  of  the  deed 
than  that  retained  by  the  grantor  in  this  case?  The 
goods,  the  identical  articles  of  merchandise,  constituted 
the  sole  security  provided  by  the  deed  for  the  pay- 
ment of  the  debts;  and  yet  the  debtor,  while  affecting 
to  devote  the  goods  to  that  purpose,  retains  the  pos- 
session, the  use,  the  power  of  selling  every  article  to  whom, 
in  what  manner,  and  on  what  terms,  he  pleases.  He  is  to 
account,  though,  if  called  on.  But  is  this  more  than  a 
personal  accountability?  The  goods  are  gone.  You  can 
not  follow  them.  The  money  received  for  them  has  no  ear- 
mark. You  cannot  follow  it  though  the  grantor  pay  it 
away  the  moment  after  he  receives  it,  in  satisfaction  of  his 
own  debt.  AVhat  are  you  then,  after  all,  but  a  general 
creditor?  To  this  purpose  the  case  of  Ryall  v.  Rolle^is 
very  strong.  That,  it  is  true,  was  a  case  under  the  bank- 
rupt acts,  and  they  are  particularly  strong  and  high-toned 
on  these  subjects,  especially  21  James  I.  Yet  the  quota- 
tions I  shall  make  do  not  seem  so  much  founded  on  them  as 
deduced  from  the  principles  of  the  common  law."  He 
then  quotes  from  the  language  of  Burnet,  J.,  and  Lord 
Hardwicke ;  and  says  in  a  note  to  the  same  case:  "  I  would 
not  be  understood  to  impugn  the  doctrine  so  well  estab- 
lished, and  applicable  to  the  common  case  of  mortgages 
and  deeds  of  trust,  that  possession  is  no  evidence  of  fraud, 
where  it  follows  the  deed,  and  is  consistent  ivith  its  pwyoses. 
My  remarks,  indeed,  have  been  made  to  little  purpose,  if 

1  p.  425.  2  1  Atk.  1C5. 

52 


DOCTRINE    OF    THE    AMEIIICAX   JMAJOlllTY.  §    35 

they  have  not  shown  the  wide  difference  between  such  cases 
and  that  at  bar." 

§  35.  The  doctrine  adhered  to  in  Virginia.  — Janney  v. 
Barnes  ^  was  a  case  where  an  entire  stock  of  goods  in  trade 
was  conveyed  to  secure  all  the  debts  of  the  grantors,  and 
the  latter  were  to  remain  in  possession  for  the  purpose  of 
converting  the  property  into  money  and  paying  the  debts, 
but  this  only  as  agents  of  the  grantee.  The  conveyance 
was  sustained  as  a  valid  security.  The  failure  of  the  ap- 
pellate court  to  give  in  an  opinion  the  reasons  for  their 
judgment  detracts  from  the  value  of  the  case,  and  leaves  the 
real  basis  of  the  decision  indeterminate.  But  it  has  been 
treated  as  resting  on  the  question  of  the  grantor's  agency 
for  the  grantee,  in  the  later  case  of  Sheppards  v.  Turpin,^ 
w^here  the  opinion  of  Daniel,  J.,  recognizes  it  as  not  con- 
flicting with  or  detracting  from  the  authority  of  Lang  v. 
Lee,  "  an  authority  which  stands  unshaken  b}'  any  decision 
of  this  court."  His  opinion  proceeds  as  follows  ;  "It  (the 
deed  under  examination)  conveys  the  whole  of  his  estate, 
real  and  personal,  including  all  h-is  clioses  in  action,  avow- 
edly with  the  purpose  of  securing  all  his  creditors  ;  yet  re- 
serves to  the  debtor  the  right  to  retain  possession  of  the 
whole  subject-matter  conveyed,  as  against  all  having  debts 
against  him  at  the  date  of  the  deed,  for  three  years  ;  also 
the  right  to  carry  on  his  business  of  a  brickmaker  to  any 
extent  that  he  and  his  trustees  may  think  proper;  and  em- 
powers bim  to  borrow  from  the  trustees,  and  the  trustees  to 
advance  him,  any  sums  they  in  their  judgment  shall  deem 
sufficient  for  the  prosecution  of  his  business  ;  authorizes  the 
trustees  to  become  his  securities  in  all  contracts  for  the  hire 
of  laborers  he  may  make;  and  if,  at  any  time  after  such 
loans  or  advancements  are  made,  the  trustees  shall  deem  his 
conduct  injudicious  or  unthrifty,  t'hey  have  full  power  to 

1  11  Leigh,  100  (1840).  ^  3  Qratt.  357  (1847). 

53 


§    35  IKAUDULENT    MORTGAGES    OF    MERCHANDISE. 

sell  the  whole  of  the  trust  property,  if  necessary,  to  pay 
such  loans  and  advancements,  and  discharge  those  contracts 
for  the  laborers,  to  which  they  may  have  become  sureties.  All 
the  creditors  who  do  not  assent  to  the  terms  of  the  deed 
on  or  before  the  1st  day  of  April  ensuing  its  date,  are  to  be 
postponed  to  those  who  do ;  and  power  is  given  to  a  major- 
ity in  number  of  those  who  do  assent,  to  extend  the  time  of 
closing  the  deed  to  a  period  undefined,  and  unlimited  except 
by  their  own  discretion.  No  power  is  expressly  retained  to 
the  grantor  to  sell  his  stock  in  trade  on  hand,  which  is  em- 
braced in  the  deed,  but  it  is  necessarily  implied  in  the  right 
reserved  to  carry  on  his  business  during  the  three  years. 
May  we  not  properly  ask,  as  Judge  Carr  did,  in  the  case  of 
Lang  V.  Lee ;  '  Can  we  imagine  powers  more  completely 
adequate  to  the  destruction  of  the  avowed  purposes  of  the 
deed  than  those  retained  by  the  grantor  in  this  case  ?  '  The 
debtor,  whilst  professing  to  dedicate  his  whole  property  to 
the  payment  of  his  debts  then  due,  reserves  to  himself  a 
power  by  which  he  may,  without  any  violation  whatever  of 
the  express  stipulations  of  the  deed,  divert  the  whole  of  the 
property  to  uses  and  purposes  wholly  foreign  to  the  leading 
object  avowed." 

In  Spence  v.  BagwelP  a  deed  was  held  bad  which  gave 
the  grantor  possession  from  its  date,  November  1,  1841,  to 
the  maturity  of  the  debt  secured,  March  1, 1843,  Avith  power 
during  that  period  to  sell  and  dispose  of  the  property  con- 
veyed, consisting  of  land,  slaves,  bacon,  tobacco,  and  a 
tobacco  factory  with  its  fixtures,  and  to  give  and  make  title 
thereto,  and  to  collect  proceeds  of  sales;  but  on  condition 
that  he  pay  over  the  moneys  collected  to  the  trustee  named 
in  the  deed.  Though  here,  as  in  a  former  case,  we  have  no 
written  opinio-n  of  the  court,  yet  it  may  be  observed  that 
while  counsel  defending  the  deed  demurred  to  Lang  v.  Lee 
as  an  authority,  that  case  and  Sheppards  v.  Turpin  were 

1  6Gratt.  444(1849). 

54 


DOCTKIXE    OF    THE    AMEKICAX    MAJORITY.  §    37 

pressed  upon  the  attention  of  the  court  by  the  counsel  at- 
tacking the  deed  ;  so  the  decision  may  be  taken  as  an  ad- 
herence to  the  doctrine  of  those  cases. 

It  is  clear  that  that  doctrine  was  already  Avell  established, 
from  the  later  case  of  Addington  v.  Etheridg-e.^  In  this 
case,  the  trust  deed  provided  that  Harrison,  the  grantor, 
should  keep  possession  of  and  sell  the  stock  of  goods  in  the 
usual  lin'e  of  his  trade,  and  occupy  the  store,  until  default 
in  the  payment  of  any  of  the  debts  secured,  or  until  the 
trustee  should  be  requested  by  any  of  the  creditors  to  close 
the  deed  by  a  sale.  Daniel,  J.,  held  that  "  this  power  is 
one  incompatible  with  the  avowed  purpose  of  the  grantor  to 
furnish  an  indemnity  to  his  creditors  ;  is  equivalent,  in  its 
effects,  to  a  power  of  revocation  ;  and  fully  adequate  to 
the  defeat  of  the  provisions  of  the  deed.  And,  therefore, 
that  this  deed  is,  according  to  the  principles  adjudicated 
by  this  court  in  the  cases  of  Lang  v.  Lee  and  Sheppards  v. 
Turpin,  fraudulent  ^er  se,  null  and  void." 

§  36.  Distinction  as  to  the  purpose  of  the  reserved 
power;  agency  for  the  trustee. — The  last-named  case, 
and  the  two  others  which  it  sustained,  are  recognized  as  au- 
thorities in  Marks  v.  Hill,^  where  the  conveyance  to  a  trustee 
of  a  stock  of  goods  in  trade  was  sustained  solely  on  the 
ground  that  the  retention  of  the  grantor  as  a  salesman  of 
the  goods  was  but  as  an  agent  of  the  trustee  ;  Lang  v.  Lee, 
Sheppards  v.  Turpin,  and  Addington  v.  Etheridge,  being 
especially  distinguished  by  reason  of  the  damaging  fact  of 
the  potential  control  reserved  to  the  grantor  over  the  goods 
conveyed.  This  case  enunciates  clearly  the  rule  which,  in 
fact,  governed  Janney  v.  Barnes. 

§  37.  The  reserved  power  of  sale  ascertained  hy  im- 
plication. —  Still  later  is  the  case  of  Perry  v.  Shenandoah 

1  12  Gratt.  436  (1855).  '  15  Gratt.  400  (1859). 

55 


§  37    FRAUDULENT  MORTGAGES  Or  MERCHANDISE. 

Nat.  Bank,^  in  which  the  grantor  in  a  trust  deed  conveyed, 
with  other  property,  "all  of  his  stock  in  trade,  with  all 
accretions  to  and  replenishments  of  said  stock,"  and  con- 
tinued in  possession  and  in  the  conduct  of  his  business  as 
formerly.  The  court  adhered  to  the  doctrine  of  Lang  v. 
Lee  and  the  other  cases  above  cited,  furnishing  the  follow- 
injr  reasons  for  its  rulino;.  "  Now  it  is  true  that  in  the  deed, 
under  consideration,  there  is  no  express  provision  that  the 
grantor  should  retain  possession  of  the  goods  (the  stock  in 
trade)  and  carry  on  the  business,  selling  and  receiving  the 
proceeds  as  before  ;  but  the  power  to  do  so,  though  not 
conferred  in  express  terms,  arises  by  clear  and  irresistible 
implication.  The  trustee,  by  the  terms  of  the  deed,  can 
only  sell  '  upon  the  written  direction  of  either  of  the  par- 
ties secured ;  *  and  it  is  provided  that  '  the  trustee  shall 
not  be  held  responsible  for  any  of  the  property  conveyed 
until  he  is  ordered  to  sell  the  same.'  If  the  written  direc- 
tion is  never  given,  the  property  is  never  to  be  sold  by  the 
trustee.  The  trustee  has  no  control  of  it,  and  no  account- 
ability with  respect  to  it.  Where,  then,  does  the  posses- 
sion remain?  Who  alone  has  the  control  over,  and 
disposition  of ,  these  goods?  Plainly,  the  grantor,  until  a 
sale  is  directed  in  writing  by  one  of  the  parties  secured. 
Under  this  deed  the  grantor  might,  for  an  unlimited  time, 
go  on  and  sell,  and  buy,  and  conduct  his  trade  just  a*^  be- 
fore, without  accounting  to  the  trustee  or  any  one  else,  if 
the  parties  to  the  deed  did  not  choose  to  give  written  direc- 
tions to  the  trustee  to  sell.  By  dear  imjjUcation  from  the 
face  of  the  deed,  this  power  is  conferred  upon  the  grantor. 
And  the  record  shows  that  he  acted  under  this  implied 
authority  for  hvo  years ;  and  but  for  the  action -of  the  ap- 
pellants in  levying  their  execution,  might  have  gone  on  for 
years  longer.  Up  to  the  date  of  the  levy  of  the  execution, 
the  grantor  carried  on  his  business  just  as  he  did  before  the 

1  27  Gratt.  755(1870). 

56 


DOCTRINE    OF    THE    AMEUICAX    MAJOKITV.  §    38 

execution  of  the  deed,  yelling  the  goods,  receiving  the 
money,  buying  other  goods,  rendering  no  account,  but  con- 
ducting his  business  as  i.^  no  deed  had  been  executed. 
Such  a  power  as  this,  whether  it  arises  from  express  provi- 
sions of  the  deed,  or  from  dear  implication,  is  entirely  in- 
consistent with  the  avowed  purposes  of  the  trust,  and,  upon 
the  authority  of  the  cases  above  cited,  must  be  declared 
fraudulent  per  se,  and  therefcTe  null  and  void." 

New  York. 

§  38.  Early  Xew  York  cases. — The  cases  in  New  York 
deserve  especial  attention,  on  account  not  only  of  their 
number,  but  also  of  the  numerous  criticisms  that  have 
been  made  upon  them.  Examples  of  these  are  seen  in  the 
quotations  above  made  from  the  opinion  in  Brett  v.  Carter.^ 
In  arguing  Robinson  v.  Elliott,  counsel  characterized  the 
New  York  cases  as  "  vacillating  and  unsatisfactory."  But 
an  examination  of  the  leadino;  cases  from  this  State  dis- 
closes  far  more  harmony  than  discord. 

Divver  v.  McLaughlin,  the  earliest  case,  arose  in  the  Su- 
preme Court  of  the  state  in  May,  1829.^  One  Stephens, 
to  secure  a  note  for  $800,  .due  in  four  months  from  its  date, 
gave  to  McL.  a  mortgage  on  his  goods  and  chattels  in  the 
house  occupied  by  him,  including,  among  others,  his  stock 
of  goods  in  his  grocery  store.  The  mortgage  provided  that 
he  was  to  remain  in  quiet  and  peaceable  possession  of  the 
goods,  and  in  the  full,  fi'^e  enjoyment  of  the  same.  It 
appeared  in  evidence  that -the  mortgagee  had  never  taken 
possession  of  the  property,  but  had  allowed  S.  to  continue 
to  conduct  business  therewith  until  maturity  of  the  debt, 
and  thereafter  indefinitely,  on  account  of  misfortunes  of 
S.  Three  years  after  the  mortgage  was  executed,  Divver 
obtained  a  judgment  against  S.,  and  levied  on  the  stock 

1  Ante,  sect.  4.  «  2  Wend.  596 ;  20  Am.  Dec.  G55. 

57 


§    oil  FKAUDLLEXT    IHORTGAGES    OF    MEKCIIANDISE. 

of  goods  then  in  tho  store,  being  nominally  the  same  stock 
mortgaged,  but  really  different  goods. 

The  court  decided,  among  other  things,  that  the  retention 
of  possession  and  tlie  actual  selling  of  goods  by  the  debtor^ 
"VN'ithout  accounting  to  the  creditor,  rendered  the  mortgage 
fraudulent  in  law,  and  void  as  to  the  fixtures  and  standing 
casks  no  less  than  as  to  the  goods.  It  was  held  that  on  a 
conceded  or  settled  state  of  the  facts,  fraud  is  a  question 
of  law.  It  was  said  :  "To  sanction  a  transaction  like  this 
would  open  a  door  to  frauds  innumerable,  and  to  an  extent 
incalculable." 

McLachlan  v.  Wright^  resembled  the  preceding  case,  the 
stipulations  being  similar,  and  the  property  conveyed  being 
a  brewer's  stock  of  beer,  malt  and  hops,  with  utensils, 
furniture,  etc.  The  debtor  remained  in  charge,  and  sold 
goods  without  accounting  to  his  creditor,  or  being  required 
to  do  so.  The  verdict  of  a  jury  that  this  transaction  was 
fraudulent  was  sustained,  as  a  matter  of  law,  on  the  ground 
that  the  debtor  not  only  retained  possession  of  the  prop- 
erty, "  but  used  and  disposed  of  it  as  his  oivn." 

§  39.  The  leading  case  of  Wood  v.  Lowry;  views  of 
Brousoii,  J. — Wood  r.  Lowry^  occupies  a  leading  posi- 
tion on  this  question.  The  debtor,  a  merchant,  remained 
in  possession,  and  "proceeded  to  sell  the  goods  in  the 
usual  course  of  business  of  a  country  merchant,  and  in 
other  respects  used  them  as  his  own."  The  jury  was 
instructed  that  if  the  effect  of  this  arrangement  would  be 
«'  to  hinder,  dcla}^,  and  defraud  creditors,  they  were  author- 
ized to  infer,  and  ought  to  infer,  that  such  was  his  intent." 
Bronson,  J.,  pronouncing  the  opinion  of  tbe  court,  said: 
"  KelloiTjr  was  not  the  airent  or  servant  of  the  plaintiffs  to 
sell  the  goods  and  account  to  them  for  the  proceeds,  but 
was  avowedly  in  business  for  himself.     He  had  the  posses- 

1  3  Wend.  348  (1829).  '  17  Wend.  492  (1837). 

58 


DOCTEIM-:    OF    THE    AMERICAN    MAJORITY.  §    39 

sion  of  the  property,  with  full  authority,  by  the  express 
assent  of  the  plaintiffs,  to  sell  and  dispose  of  it  at  his 
pleasure,  and  to  deal  with  it  in  all  respects  as  other  mer- 
chants did  with  their  merchandise.  It  is  true  that  Kellogg 
said  he  would  remit  to  the  plaintiffs  the  avails  of  such 
property  as  he  should  sell  before  the  1st  of  June  ;  but 
this  was  mere  matter  of  confidence  between  the  parties;  it 
was  no  part  of  the  contract  under  which  plaintiffs  make 
title.  The  property  was  not  left  with  Kellogg  to  be  kept 
until  the  debt  was  paid  or  the  plaintiffs  should  call  for  it, 
but  he  had  it  for  the  purpose  of  trading  with  it,  and  making 
profits  from  the  sale  of  it.  When  sold,  the  fruits  were  his 
own,  except  that,  like  every  other  debtor  he  was  under  an 
obligation  to  satisfy  the  demands  of  his  own  creditors'.  He 
treated  the  property  as  his  own.  It  is  impossible  to  say 
that  the  plaintiffs  had  any  legal  claim  to  it  as  against  the 
creditors  of  Kellogg  or  purchasers  under  him."  "  Instead 
of  leaving  the  matter  to  the  jury,  as  a  question  of  fact  for 
their  determination,  the  judge  would  have  been  well  war- 
ranted in  instructing  them  that  the  transaction  was  fraudu- 
lent and  void  in  law,  and  that  the  defendants  were  entitled 
to  a  verdict  in  their  favor." 

The  question  was  mooted  again,  though  it  did  not  fairly 
arise  and  was  not  decided,  in  Stoddard  v.  Butler.^  This  was 
a  case  of  an  assignment  of  a  stock  in  trade  by  way  of 
mortgage,  the  assignor  being  left  in  possession,  to  sell  ag 
ao'ent  only,  for  the  benefit  of  the  grantees.  Chancellor 
Walworth's  decision,  holding  this  assignment  fraudulent 
and  void,  was  reported  sub  nom.  Butler  v.  Stoddard.-  Upon 
appeal,  this  decree  was  affirm-cd  in  the  Court  of  Appeals 
by  a  divided  court.  Though  no  principle  was  thus  settled, 
yet  the  full  and  exhaustive  opinions  of  several  of  the  sena- 
tors on  both  sides  are  interesting  and  valuable  contributions 
to  the  literature  of  this  subject. 

1  20  Wend.  507.  ^  7  Paige,  163. 

59 


§    40         FKAUDtJLENT    ]\IORTGAGES    OF    iMERCllANDISE. 

The  decision  of  Wood  v.  Lowiy  corrected  the  aberra- 
tion induced  by  the  contrary  case  of  Levy  v.  Welsh, ^  in 
whicli  Vice-ChanceHor  jNIc-Coun  held  a  mort^aije  of  a  cer- 
tain  stock  of  goods,  Avith  all  the  grantor  might  acquire,  to 
be  o\\\y  i^rima  facie  fraudulent,  and  open  to  explanation. 
Smith  V.  Acker-  cannot  be  considered  a  discordant  case. 
There  it  was  not  perishable  or  trading  property,  but  a 
printing  press,  that  was  mortgaged.  Though  the  mort- 
gager was  to  remain  in  "the  full  and  free  enjoyment 
of  it,"  this  could  scarcely  intend  a  sale  of  the  press.  The 
question  of  fraudulent  intent  in  such  a  case  would  prop- 
erly be  submitted  to  a  jury. 

§  40.  Griswold  v.  Slieldon  explicit  and  not  doubtful 
upon  this  question. — In  Griswold  v.  Sheldon,^  which  has 
sometimes  been  considered  a  doubtful  case,  the  eight  judges 
of  the  Court  of  Appeals  were,  indeed,  divided  as  to  the 
reasons  for  their  decision,  thou<2::h  concurrino;  as  to  the  re- 
suit.  But  this  difference  of  opinion,  so  far  from  sufficing 
to  weaken  the  authority  of  Wood  v.  Lowry,  did  not  reach 
the  question  of  a  reserved  power  of  sale.  So  far  as  the 
judges  differed  in  any  respect  upon  this  subject,  their  dif- 
ference referred  merely  to  an  incidental  feature  of  it, 
namely  :  the  proper  construction  of  the  instrument  before 
the  court,  and  did  not  involve  the  main  question  in  any  re- 
spect. Bronson,  C.  J.,  who  had  delivered  the  opinion  in 
the  former  case,  drew  from  the  lanojuaoje  of  the  morto-age 
in  this  case  the  plain  implication  that  the  mortgager  was  to 
continue  business  with  the  goods  as  before;  upon  which  he 
Avould  have  adjudged  the  transaction  fraudulent,  without  the 
necessity  of  leaving  any  question  of  fact  to  the  jury ;  and 
in  this  view  he  had  the  concurrence  of  three  judges,  one  of 
Avhom  (McCoun,)  was  the  Yice  Chancellor  who  had  decided 

1  2  Edw.  Ch.  438  (1835).  ^  23  Wend.  653. 

3  4N.  Y.  581  (April,  1851). 

GO 


DOCTRINE    OF    THE    AMERICAN    MAJORITY.  §    41 

Levy  V.  Welsh.  The  ether  four  judges  insisted  that  the 
hinguage  of  the  mortgage  did  not  warrant  such  implication, 
and,  therefore,  declined  to  entertain  it;  but  admitted  that 
if  such  were  the  proper  construction  of  the  instrument,  it 
would  be  void  under  the  authority  of  Wood  v.  Lowry. 
Thus,  though  they  w'ere  agreed  as  to  the  law  on  the  point 
now  under  consideration,  there  was  no  adjudication  upon  it 
by  the  court,  because  they  disagreed  as  to  that  primary 
matter  ;  and  the  case  was  decided  on  other  grounds.  The 
criticism  made  in  Brett  v.  Carter^  is,  therefore,  inaccurate, 
that  the  court  decided  by  "  a  bench  equally  divided  in  opin- 
ion," that  the  mortgage  w^as  "void  on  its  face  as  mere 
matter  of  law."  As  the  difference  of  opinion  in  this  case 
had  no  reference  to  the  rule  of  substantive  law,  Griswold 
V.  Sheldon  cannot  be  properly  cited,  either  as  an  authority 
opposed  to  the  doctrine  of  Robinson  v.  Elliott,  or  as  weak- 
ening the  support  to  that  doctrine  found  in  the  other  New 
York  cases. 

§  41.  The  doctrine  established  in  New  York. — Edgell 
V.  Hart  soon  followed.  It  was  decided  in  the  Supreme 
Court  in  June,  1851,-^  without  reference  to  Griswold  v. 
Sheldon.  The  decision  of  the  Court  of  Appeals  in  1853^ 
settled  the  question  which  was  supposed  to  have  been  left 
doubtful  in  Griswold  v.  Sheldon.  The  license  to  sell  in  this 
case  was  inferred  from  a  written  schedule  attached  to  the 
instrument.  Denio,  C.  J.,  held,  with  the  concurrence  of 
a  majority  of  the  court,  that  "  the  existence  of  such  a  pro- 
vision, out  of  the  mortgage  or  in  it,  would  invalidate  it  as 
matter  of  law,  and  that,  where  the  facts  are  undisputed,  the 
court  should  so  declare." 

In  1859  was  presented  the  case  of  Gardner  v.  McEwen,* 
in  which  no  retreat  is  manifest  from  the  position  taken  in 

1  2  Low.  458.  3  9  N.  Y.  213. 

»  13  Barb.  3S0.  *  19  N.  Y.  123. 

61 


§  41    FRAUDULENT  MORTGAGES  OF  MERCHANDISE. 

Etlgell  V.  Hart.  Here  the  agreement  to  allow  sales  in  course 
of  trade  did  not  appear  on  the  face  of  the  mortgage,  nor 
was  it  proved.  Deuio,  C.  J.,  adhering  to  the  doctrine  of 
the  last  named  case,  held,  that  while  the  facts  proved  *'  made 
a  pretty  strong  case  for  the  jury,"  still  it  was  one  for  them- 
selves to  determine.  It  is  plain  that  here  the  question  of 
doubt  was  as  to  the  weight  of  proof  and  the  facts  proved.  If 
the  fatal  fact  should  be  finally  "admitted  or  ascertained," 
the  rule  in  Edgell  v.  Hart  would  apply,  of  fraud  in  law.  It 
would  seem  that,  upon  clear  proof,  the  court  might  direct  a 
verdict  of  fraud  in  those  States  where  such  directions  are 
allowed  when  the  evidence  is  clear;  substantially  as  was 
done  in  Paget  v.  Perchard  by  Lord  Kenyon.  This  is  done 
in  New  York.^ 

The  two  later  cases  of  Mittnacht  v.  Kelly  ^  and  Russell  v. 
Winne^  present  the  question  in  both  phases  of  the  facts  as 
to  the  reservation  of  a  power  of  sale.  In  the  former  case 
the  reservation  appeared  on  the  face  of  the  mortgage ;  in 
the  latter  it  was  shown  by  facts  alhinde.  In  both  cases  the 
mort<?ao;e  was  ruled  to  be  fraudulent  in  law,  followino: 
Edgell  V.  Hart  and  Wood  v.  Lowry. 

In  Mittnacht  v.  Kelly,  Parker,  J.,  said  :  "  The  mortgaging 
the  whole  stock  in  trade,  ivith  the  increase  and  decrease 
thereof,  and  the  providing  for  the  continued  possession  of 
the  mortgager,  can  have  no  other  meaning  than  that  the 
mortgasree  should  all  the  time  retain  a  lien  on  the  whole 
stock,  by  way  of  mortgage,  the  mortgager  making  pur- 
chases from  time  to  time,  and  selling  off  in  the  ordinary 
manner,  the  intent  being  not  to  create  an  absolute  lien  on 
any  property,  but  a  fluctuating  one,  which  should  open  to 
release  that  which  should  be  sold,  and  take  in  what  should 
be  newly  purchased.  This  is  just  such  an  arrangement  as 
was  held  in  Edgell  v.  Hart  to  render  the  mortgage  void. 

'  Qeepost,  sect.  42.         '^  3  Keyes,  407  (1867).        »  37  N.  Y.  591  (1868). 

62 


DOCTRINE    OF    THE    AMERICAN    3IAJ0RITY.  §    41 

The  case  cannot  be  distinguished  from  that,  and  the  law,  as 
propounded  in  that  case,  must  be  held  applicable  to  this."  ^ 

And  in  Russell  v.  Winne,  Grover,  J.,  said :  "  The  ques- 
tion is  whether  an  agreement  by  the  mortgagee  made  with 
the  mortgager  that  the  latter  may  sell,  for  his  own  benefit 
and  as  his  own,  portions  of  the  property  covered  by  the 
mortgage,  renders  the  mortgage  fraudulent  and  void  as  to 
such  portions.  It  would  seem  that  the  bare  statement  of 
the  proposition  would  be  sufficient  to  warrant  an  affirma- 
tive answer. 

"  If  there  is  an-  agreement  by  the  mortsagree  that  the 
mortgager  may  sell  or  dispose  of  any  of  the  property  for 
his  own  benefit,  it  is  established  conclusively  that  the  mort- 
gage was  given  for  some  purpose  other  than  that  of  secur- 
iuor  a  debt  to  the  mort^ag^ee,  or  of  orivino-  him  any  real 
interest  in  such  property.  It  is  evident  that,  as  to  such 
property,  the  mortgagee  not  having  any  real  estate  therein, 
such  real  interest  remains  in  the  mortgager.  Why,  then, 
is  the  mortgage  given  upon  such  property?  Evidently,  the 
better  to  enable  the  mortgager  to  enjoy  the  benefit  thereof, 
at  the  expense  of  creditors.  Were  there  no  creditors  of 
the  mortgager,  there  would  be  no  object  in  giving  or  takino; 
mortgages  accompanied  with  such  an  agreement.  It  is,  I 
think,  clear  that  such  an  agreement  shows  that  the  mort- 
gage was  not  made  in  good  faith,  and  without  a  design  to 
hinder  creditors.  There  is  no  question  of  intention  to  he 
submitted  to  a  jury.  It  already  appears  that,  as  to  such 
property,  the  mortgage  was  not  designed  by  the  parties  as 
an  operative  instrument  between  them  ;  and  its  only  opera- 
tion must  be  to  the  prejudice  of  others.  The  court  should, 
as  to  such  property,  pronounce  it  void,  for  the  reason  that 
the  evidence  conclusively  shows  it  fraudulent." 

Ford  V.  Williams,'-  Conkling  v.  Shelly ,3  and  Miller  v. 

»  p.  408.  -•  24  N.  Y.  359.  '  28  N.  Y.  860. 

63 


§41  FRAUDULENT    MORTGAGES    OF    MERCIIAXDISE. 

LockwootP  cannot  be  regarded  as  exceptional  cases.  In 
these  cases  it  was  a  part  of  the  agreement  for  sales  by  the 
mortgager  that  he  should  remit  the  proceeds  to  the  mort- 
gagee, which  was  held  sufficient  to  sustain  the  arrangement, 
though  not  actually  carried  out  by  the  mortgager.  In  the 
latter  case,  however,  Potter,  J.,  dissented  on  the  ground 
that  the  case  really  fell  -within  the  rule  of  Wood  v.  Lowry 
and  Edgell  v.  Hart,  so  that  there  was  no  certain  security. 

Nor  is  it  clear  that  the  late  case  of  Yates  v.  Olmsted  -  is 
be  regarded  as  an  exceptional  case.  The  Supreme  Court' 
followed  the  cases  above  referred  to,  and  concluded  that  it 
was  intended  in  this  case  to  allow  sales  by  the  mortgager  in 
due  course  of  trade,  although  the  referee  had  found  that  the 
mortiraffee  had  made  no  such  ajxreement,  and  did  not  know 
that  such  sales  were  made.  The  dissenting  opinion*  states 
that  the  mortcrao:ee  was  not  in  the  store  duringthe  existence 
of  the  mort2:ao;e,  and  relies  on  this  fact  as  distinguishino;  the 
case.  The  Court  of  Appeals  put  their  decision  sustaining 
the  mortgage  upon  the  finding  of  the  referee,  as  a  determi- 
nation of  the  facts,  treating  it  as  of  equal  weight  with  the 
verdict  of  a  jury;  from  which  it  resulted  that  no  agree- 
ment for  sales  was  made,  and  no  fraudulent  intent  existed. 

This  is  the  only  case,  if  this  be  one,  showing  any  sub- 
stantial deflection  from  the  rule  established  in  Wood  v. 
Lowry  and  Eclgell  v.  Hart,  and  which  Avas  succinctly  stated 
as  follows  in  Russell  v.  Winne:  "  It  may,  therefore,  be  re- 
rarded  as  settled  that  an  agreement  between  mortgaa-er  and 
mortgagee,  that  the  former  may  dispose  of  the  mortgaged 
property  to  his  own  use,  renders  the  mortgage  fraudulent 
as  to  creditors,  whether  the  agreement  be  contained  in  the 
mortgage  or  not."  In  Frost  v.  Warren,^  the  majority  of 
the  court  sustained  the  verdict  of  the  jury  in  favor  of  the 
conveyance,  in  view  of  the  slight  and  unsatisfactory  char- 

'  32  X.  Y.  293.  *  65  Barb.  402. 

2  56  N.  Y.  632.  ^  42  N.  Y.  204. 

'  G5  Barb.  43. 

64 


DOCTRINE    OF    THE    AMERICAN    JIA.TORITV.  §    43 

acter  of  the  evidence,  while  still  recogniziug  the  principle  of 
law  above  stated. 

An  exhaustive  statement  of  all  the  New  York  cases  has 
not  been  attempted,  but  sufficient  citations  have  been  made 
to  show  a  clear  and  lively  understanding,  in  the  New  York 
courts,  of  the  legal  fraud  underlying  all  such  so-called 
mortgages. 

§  42.  Frequent  applications  of  the  doctrine  in  prac- 
tice.—  This  doctrine  has  been  frequently  applied  by  the 
inferior  courts  in  New  York,  as  the  well  settled  law  of  the 
State  ;  ^  even  to  the  extent  of  directing  a  verdict  or  order- 
ing a  non-suit,  where  the  facts  are  plain  and  well-estab- 
lished,-as  is  done  in  other  cases  involving  fraud  ;^  there 
being  in  such  a  case  no  question  to  be  submitted  to  a  jury.* 
It  may  be  noted  also,  as  a  different  application  of  the  same 
principle,  that  a  conditional  sale,  reserving  title,  though 
ordinarily  sustained  as  valid,  will  be  deemed  fraudulent  and 
void,  if  the  grantee  is,  pending  the  maturity  of  the  contract, 
allowed  to  dispose  of  the  goods  at  his  own  discretion.^ 

§  43.  The  doctrine  advisedly  adhered  to  and  clearly 
explained.  —  This  line  of  cases  is  well  supplemented  by  the 
recent  decision  in  Southard  v.  Benner,^  which  eliminates  all 
that  has  been  heretofore  criticised  as  "  vacillating  and  uu- 
s-atisfactory  "   in  the  law  of  this  State  on  the  subject,  and 

1  Delaware  V.  Ensign,  21  Barb.  85;  Marston  u.  Vultee,  8  Bosw.  129;  Car- 
penter V.  Simmons,  1  Kob.  3C0;  National  Bank  v.  O'Brien,  6  Hun,  231; 
Dutcher  v.  Swartwood,  15  Id.  31 ;  Cit}'  Bank  v.  Westbury,  16  Id.  458;  Bain- 
bridge  u.  Richmond,  17  Id.  391;  Spies  ?;.  Boyd,  IE.  D.Smith,  445;  Ball  v. 
Slafter,  26  Hun,  353 ;  Smith  v.  Cooper,  27  Id.  565. 

2  Dodds  V.  Johnson,  3  Thomp.  &  C.  215. 
^  Carnes  v.  Piatt,  1  Sweeney,  147. 

*  Marston  v.  Vultee,  supra. 

5  Ludden  v.  Hazen,  81  Barb.  650;  Bonesteel  v.  Flack,  41  Barb.  435;  Pow- 
ell V.  Preston,  1  Hun,  513.  The  same  rule  is  adopted  in  Connecticut,  see 
post,  sect.  79 ;  and  approved  in  Tennessee,  see  post,  sect.  61. 

«  72  N.  Y.  424  (1878). 

5  65 


^    4o  rUAUDULEM'    MOKTGAGES    OF    MEUC'llANDISK. 

which  was  apparently  intended  to  close  the  controversy  in 
New  York.  Here  the  evidence  outside  the  mort^jafje  showed 
that  the  mortojager  had  continued  to  make  sales  of  the 
mortgaged  property  as  usual  theretofore,  and  tended  to 
prove  that  this  was  done  by  permission  of  the  mortgagee. 
The  jury  found  that  there  was  an  arrangement  to  that  effect 
between  the  parties.  The  Court  of  Appeals,  without  dis- 
sent, held  that  the  fraud  in  this  case  was  to  be  ruled  on  ju- 
dicially, as  a  question  of  law,  and  that  Edgell  v.  Hart, 
Frost  V.  Warren,  Gardner  v.  McEwen,  and  Russell  v.  Winne 
were  concurrent  witnesses  to  the  existence  of  this  rule  as 
fundamental  in  the  jurisprudence  of  New  York.  Said 
Allen,  J.,  in  pronouncing  the  opinion  of  the  majority: 
"  Whether  the  agreement  is  in  or  out  of  the  mortgage, 
whether  verbal  or  in  writing,  can  make  no  difference  in 
principle.  Its  effect  as  characterizing  the  transaction  would 
be  the  same.  The  difference  in  the  modes  of  proving  the 
agreement  cannot  take  the  sting  out  of  the  fact  and  render  it 
harmless.  If  it  is  satisfactorily  established,  the  result  upon 
the  security  must  be  the  same.  It  is  the  fact  that  such  an 
agreement  has  been  made  and  acted  upon  that  in  law  con- 
demns the  security,  and  not  the  fact  that  it  is  proved  by  the 
instrument  of  suretyship,  instead  of  b}'^  parol  or  in  some 
other  way."  ^ 

This  clear  statement  of  the  distinctions  between  rules  of 
substantive  law  and  rules  of  mere  procedure,  inherent  in 
this  class  of  cases,  was  evidently  designed  to  meet  the  criti- 
cisms of  those  who  have  supposed  a  judgment,  based  on 
facts  apparent  on  the  face  of  a  written  conveyance,  to  be  a 
judgment  of  mere  constructive  or  presumptive  fraud.  It 
is  actual  fraud  that  is  adjudged  in  such  cases  ;  fraud  inher- 
ent in  the  transaction  to  which  the  parties  have  agreed  ;  and 
a  class  of  fraud  which  is  no  more  or  less  vicious  and  reprehen- 

1  The  case  digested  under  the  name  of  Southard  v.  Pinckney,  in  6  N.  Y. 
W.  D.  328,  is  evidently  the  same  case  as  Southard  v.  Benner. 


DOCTRINE    OF    THE    AMERICAN    MAJORITY.  §    43 

siblc,  whatever  be  the  character  of  the  evidence  by  which 
the  facts  of  the  transaction  are  proven. 

Still  more  recently,  in  Brackett  v.  Harvey,^  the  Court 
of  Appeals  has  been  called  upon  to  give  an  equally  clear 
explanation  of  the  distinguishing  features  of  those  cases  in 
which  the  power  of  sale  is  not  reserved  to  the  mortgager's 
use,  but  inures  to  the  benefit  of  the  mortgagee.  The 
ground  upon  which  Ford  v.  Williams,-  Conkling  v.  Shelly,' 
and  Miller  v.  Lockwood*  correctly  rest  is  clearly  pointed 
out.  It  is  that  a  sale  of  the  goods,  and  the  application 
of  the  proceeds  upon  the  mortgage  debt,  "  is  the  normal 
and  proper  purpose  of  a  chattel  mortgage,  and  within  the 
precise  boundaries  of  its  lawful  operation  and  effect ;  it 
does  no  more  than  to  substitute  the  mortg^ao-er  as  the  asfent 
of  the  mortgagee,  to  do  exactly  what  the  latter  had  the 
right  to  do,  and  what  it  was  his  privilege  and  duty  to 
accomplish."  This  is  shown  to  be  an  independent  doc- 
trine of  law,  of  equal  force  and  dignity  with  the  doctrine 
of  Southard  v.  Benner,  with  which  it  in  no  manner  con- 
flicts. In  the  case  under  consideration,  an  agreement  that 
the  mortgagee  should  accept,  as  a  payment  on  his  debt,  the 
notes  taken  by  the  mortgager  for  goods  sold  on  credit,  and 
an  agreement  that  the  proceeds  of  sales  might  in  part  be 
used  to  purchase  new  stock,  which  should  then  be  covered 
by  new  mortgage  for  the  same  debt,  were  shown  to  be  but 
modes  of  paying  the  mortgage  debt,  or  holding  the  pro- 
ceeds of  sales  subject  to  the  lien.  The  validating  feature 
•of  the  transaction  was  that  "  in  no  respect  did  it  permit 
anything  mortgaged  to  escape  the  mortgage  ;  if  it  did  not 
turn  into  cash  or  paper,  which  reduced  the  mortgage  debt, 
it  turned  into  other  property  which  became  itself  the  sub- 
ject of  the  mortgage  lien." 

1  91  N.  Y.  214;  17.  Cent.  L.  J.  112  (1883).  «  24  N.  Y.  359. 

3  28  Id.  360.  *  32  Id.  293. 

67 


§    44         FRAUDULENT    MORTGA(JES    OF    MEHCIIANDISE. 

These  distinctions  were  carefully  made  in  reversing  the 
decision  of  the  lower  court,  which  had  been  adverse  to  the 
mortgage  on  the  ground  that  in  other  respects  the  trans- 
action indicated  a  reserved  power  of  sale  for  the  benefit 
of  the  mortgagers.^  The  Court  of  Appeals  disagreed  with 
the  lower  court  in  its  opinion  that  the  proof  sustained  this 
view,  and  reversed  the  case  solely  on  the  ground  of  the 
weight  of  evidence,  saying,  "  we  see  no  evidence  of  an  agree- 
ment for  such  diversion  (of  the  proceeds  of  sales),  or  of 
such  diversion  in  fact." 

The  two  cases  named  thus  furnish  an  admirable  view  of 
the  doctrine  under  consideration,  both  as  applied  on  the 
one  hand,  or  found  to  be  inapplicable  on  the  other. 

New  Hampshire. 

§  44.  The  doctrine  received  with  favor  in  New  Hamp- 
shire.—  In  New  Plampshire,  the  early  case  of  Coburn  v. 
Pickering^  held  that  possession  retained  by  the  mortgager, 
under  a  mortgage,  with  the  right  to  the  full  use  of  the 
property,  rendered  the  mortgage  fraudulent  and  void. 
This  case  went,  probably,  farther  than  necessary,  inas- 
much as  the  property  mortgaged  consisted  of  household 
goods,  and  it  did  not  appear  that  their  use  was  tantamount 
to  their  destruction.  But  the  case  is  an  instructive  one, 
by  reason  not  only  of  the  very  elaborate  and  well-con- 
sidered opinion  of  the  court,  in  Avhich  the  rule  we  are 
considering  is  drawn  from  Twyne's  Case,  but  also  of  the 
close  and  interesting  argument  of  counsel  seeking  to  up- 
hold the  mort^asre. 

This  and  subsequent  cases  have  been  taken  as  placing 
New  Hampshire  in  the  list  of  those  States  which  adopt  the 
rule  that  retention  of  possession  alone  suffices  to  invali- 
date  such   conveyances.     Her   variation  of   the   rule  was 

1  25  Hun,  502.  ^  3  N.  H.  415 ;  14  Am.  Dec.  375  (1826). 

68 


DOCTRINE    OF   THE    AMERICAN    MAJORITY.  §    45 

applied,  in  Lang  v.  Stockwell,^  to  a  sale  of  a  horse  and 
wagon,  an  agreement  being  proven  that  the  vendor  should 
retain  the  property,  pay  taxes  on  it,  and  use  it  in  all 
respects  as  his  own  ;  which  use  the  courts  held  to  consti- 
tute the  very  essence  of  the  idea  of  property,  and  to  be 
inconsistent  with  the  idea  of  a  lawful  sale.  It  was  also 
applied,  in  Cutting  v.  Jackson,^  to  a  sale  of  certain  live 
stock  and  some  hay,  in  which  case  the  agreement  allowed 
even  a  more  extended  use  of  the  property  for  the  con- 
venience of  the  grantor,  for  the  hay  was  to  be  eaten  by 
the  stock.  The  test  applied  in  Twyne's  Case  was  taken  as 
plainly  illustrating  this  case  also,  «.e.,  the  vendor  retained 
the  property  and  used  it  as  his  own.  It  will  be  seen  that 
this  application  of  the  rule  covers  more  than  mere  retention 
of  possession.  It  is  a  trust  of  any  kind,  reserved  for  the 
benefit  of  the  mortgager,  that  avoids  such  a  transaction ; 
and,  while  the  jury  finds  the  facts  in  all  cases,  the  fraud  is 
predicated  of  those  facts  by  the  court,  as  matter  of  law, 
m  all  cases.  The  same  rule  is  applied  in  Winkley  v.  HilP 
and  Coolidge  v.  Mclvin,'*to  conveyances  of  land  with  trusts 
reserving  a  benefit  to  the  grantor.  The  question  of  the 
debtor's  intent  is  considered  immaterial.  "It  is  because 
such  trusts  are  calculated  to  deceive  and  embarrass  cred- 
itors, because  they  are  not  things  to  which  honest  debtors 
can  have  occasion  to  resort  in  sales  of  their  property,  and 
because  they  are  the  means  which  dishonest  debtors  com- 
monly and  ordinarily  use  to  cheat  their  creditors,  that  the 
law  does  not  permit  a  debtor  to  say  that  he  used  them  for 
an  honest  purpose  in  any  case."  ^ 

§  45.     The    doctrine    adopted   and    applied.  —  On  the 

authority  of  Coburn  v.  Pickering,  a  like  rule  was  applied 
to  mortgages  on  stocks  of  goods  in  trade  with  power  of 

1  55  N.  n.  561.  *  42  Id.  510. 

2  56N.  H.  353  (1875).  s  /^.  520. 

3  9  N.  H.  31 ;  31  Am.  Dec.  215. 

69. 


§    45         FRAUDULENT   MORTGAGES   OF   MEKCIIANDISE. 

sale  reserved,  in  Eanlett  v.  Blodgctt^  and  Putnam  v.  Os- 
good.- In  the  earlier  case,  Parker,  C.  J.,  referring  to  the 
provision  that  the  mortgage  should  cover  future  acquired 
goods  as  additions  to  the  stock,  thus  aptly  supplemented 
the  criticisms  of  other  courts  upon  the  uncertain  and  shifting 
character  of  such  transactions:  "If  this  doctrine  were  ad- 
mitted, a  mortgage  of  personal  property  would  be  like  a 
kaleidoscope,  in  that  the  forms  represented  would  change 
at  every  turn,  but  unlike  that  instrument  in  that  the  mate- 
rials would  not  remain  the  same."  The  result  of  the  ar- 
rangement, the  court  conceived  to  be  that  the  grantor  "  was 
the  owner,  by  the  agreement,  for  all  purposes  except  the 
rights  of  creditors;"  a  description  which  at  once  charac- 
terized the  transaction  as  fraudulent. 

In  Putnam  v.  Osgood,  which  was  twice  reported,^  it  ap- 
peared that  the  mortgage  was  given  and  received  in  good 
faith,  and  that  there  was  no  contemporaneous  agreement 
that  the  mortgager  should  continue  selling;  nevertheless, 
he  did  so  continue,  and  with  the  knowledge  of  the  mortga- 
gee ;  and  these  facts,  when  proven,  were  held  to  establish 
fraud  in  law.  This  case  as  last  reported  holds,  that  wher- 
ever, by  any  such  arrangement,  there  results,  as  here,  a 
secret  trust  for  the  benefit  of  the  grantor,  "  it  is  well  settled 
in  New  Hampshire  that  the  fraud  is  a  conclusion  of  law," 
and  this,  "  without  stopping  to  inquire  what  were  the  real 
motives  and  intentions  of  the  parties."  *  This  last  of  the 
two  decisions  in  this  case,  though  less  full,  is  in  complete 
accord  with  the  first,  where  Chief  Justice  Bellows  thus 
summed  up  the  vital  features  of  this  class  of  conveyances.^ 

"  The  avowed  object  of  a  mortgage  is  to  secure  a  debt. 
If  the  secret  purpose  be  to  protect  the  mortgager  in  the  en- 
joyment of  the  property,  and  enable  him  to  set  his  other 

1  17  X.  H.  298 ;  43  Am.  Dec.  603  (1845).     '  52  Id.  at  p.  154. 

2  51  Id.  192  (1871);  52  Id.  148.  ^  51  jd,  at  p.  202. 

3  51  Id.  192,  and  52  Id.  148. 
70 


DOCTRINE    OF   THE   A31EKICAN    ^lAJOEITY.  §    46 

creditors  at  defiance,  then  the  mortgage  is  deemed  to  be 
fraudulent  and  void  as  to  those  creditors  ;  and  of  this  there 
is  no  controversy.  If  a  trust,  inconsistent  with  the  legiti- 
mate purpose  of  a  mortgage,  is  reserved  for  the  benefit  of 
the  mortgager,  and  that  is  proved,  then  a  fraudulent  intent 
is,  with  us  and  in  many  other  jurisdictions,  a  conclusion  of 
law.  A  secret  understanding  that  the  mortgager  shall  retain 
the  possession  of  the  goods,  and  continue  to  sell  them  as 
before  for  his  own  benefit,  is  clearly  such  a  trust.  As  be- 
tween the  parties,  the  mortgager  remains  the  owner  of  the 
goods,  and  the  mortgage  is  practically  effective  only  to 
ward  off  the  claims  of  other  creditors.  If  such  a  morto:a(re 
should  be  held  to  be  valid,  it  would  furnish  the  readiest 
means  of  affording  shelter  to  an  embarrassed  debtor,  under 
which  he  could  carry  on  his  business  and  defy  his  creditors. 
The  practical  effect  of  such  a  mortgage  is  to  delay  and  de- 
feat creditors,  and  it  is  to  be  presumed  that  the  parties  in- 
tended to  do  what  their  acts  were  naturally  calculated  to 
accomplish. 

"  The  right  of  other  creditors  to  attach  the  mortgaged  prop- 
erty could  afford  but  little  relief  against  these  mischiefs. 
It  could  only  be  done  by  paying  the  mortgage  debt,  which, 
in  many  instances,  would  leave  little  or  nothing  for  the 
creditor.  In  the  meantime,  the  mortgager  would  dispose 
of  the  goods  for  his  own  benefit  and  without  paying  the 
mortgage  debt,  and  then  mortgage  the  goods,  obtained  to 
replenish  his  stock,  to  the  same  friend  for  the  same  debt, 
and  so  continue  his  business  and  be  enabled  to  snap  his 
fingers  at  his  other  creditors. 

"A  doctrine  which  should  hold  such  a  transaction  to  be 
valid  would  be  most  disastrous  in  its  consequences,  and 
finds  no  countenance  in  the  established  doctrines  on  the 
subject,  either  here  or  elsewhere." 

§  46.  Distinction  in  case  of  agency  for  the  mortga- 
gee.—  The  rule  is  recognized  in  its  application  to  mort- 

71 


§    47         rUAUDUI.KNT    MORTGAGES    OF   MERCHANDISE. 

gagC!-  on  stocks  of  goods  in  trade,  as  the  existing  rule  in 
New  Hampshire,  in  the  recent  case  of  Wilson  v.  Sullivan;^ 
but  in  this  case,  the  sales  of  goods  having  been  made  by 
the  moi-tsraser  as  the  agent  and  for  the  benefit  of  the  mort- 
gagee,  and  for  the  purpose  of  extinguishing  the  mortgage 
debt,  it  was  naturally  held,  in  accordance  with  the  ruling  in 
other  States,  that  such  a  transaction  is  valid  in  law,  if  free 
from  fraudulent  intent. 

The  doctrine  is  also  recognized  in  a  different  aspect,  in 
another  case  in  the  same  volume.'^ 

Ohio. 

§  47,  Collins  v.  Myers;  the  doctrine  illustrated  in 
Ohio.  — The  Supreme  Court  of  Ohio,  though  later  in  point 
of  time,  was  in  no  respect  less  incisive  in  its  judgment 
upon  such  transactions,  and  no  less  felicitous  in  illustrating 
their  pernicious  character,  than  those  of  the  other  States 
already  referred  to.  The  case  of  Collins  v.  Myers'*  has 
justly  been  assigned  a  leading  position  among  those  treating 
of  the  subject.  It  was  a  contest  in  equity  between  the 
assignees  under  a  mortgage  and  judgment  creditors  of  the 
morto-ao-er,  who  had  continued  to  traffic  with  the  stock  of 
goods  mortgaged  ;  though  the  agreement  permitting  this 
appeared,  not  on  the  face  of  the  instrument,  but  by  proof 
aliunde.  That  the  question  arising  out  of  these  facts  far 
transcends  that  of  mere  possession,  is  clearly  shown.  The 
language  of  the  opinion  has  deservedly  become  proverbial. 
*'  The  object  of  a  mortgage  is  to  obtain  a  security  beyond  a 
simple  reliance  upon  the  honesty  and  ability  of  the  debtor  to 
pay,  and  to  guard  against  the  risk  of  all  the  property  of  the 
debtor  being  swept  off  by  other  creditors,  by  fastening  a 
specific  lien  upon  that  covered  by  the  mortgage.     But  a 

1  58  N.  H.  260;  9  Reporter,  614  (1878). 

^  Pettee  v.  Diistin,  p.  309 ;  see  post,  sect.  144. 

3  10  Ohio,  547  (1?47). 

72 


DOCTKIAE    OF    THE    AMEUICAN    MAJOiUTY.  §    47 

mortgage,  with  possession  and  power  of  disposition  in  the 
mortgager,  is  nothing  at  last  bat  a  reliance  upon  the  honesty 
of  the  mortgager;  and,  in  fact,  is  no  security,  as  it  is  within 
the  power  of  the  mortgager,  at  any  moment,  to  defeat  the 
mortgage  lien  b}'^  an  entire  disposition  of  the  whole  property 
covered  by  the  mortgage.  Such  a  mortgage,  then,  is  no 
security,  so  far  as  the  debtor  is  concerned,  and  is  of  no 
benefit  except  as  a  loard  to  keep  off  other  creditors."  "  The 
ver}'  nature  of  a  mortgage  is  to  fasten  a  lien  upon  specific 
property ;  and  the  courts  have  gone  far  enough  when  they 
have  permitted  an  honest  possession  in  the  mortgager.  *  *  * 
But  in  this  case  there  is  no  specific  lien,  but  a  floating  mort- 
gage, which  attaches,  swells,  and  contracts  as  the  stock  in 
trade  changes,  increases,  and  diminishes  ;  or  may  wholly  ex- 
pire by  entire  sale  and  disposition,  at  the  will  of  the  mort- 
gager. Such  a  mortgage  is  no  certain  security  upon  specific 
property." 

"  In  such  case  the  whole  right  to  dispose  of  the  property 
to  pay  a  debt  depends  upon  the  will  of  the  debtor,  not 
affected  by  the  rights  of  the  mortgagee ;  and  what  reason  is 
there  in  permitting  the  will  of  the  debtor  to  determine  whether 
property  shall  legally  go  to  pay  a  debt  or  not?  If  it  be  the 
wdl  of  the  debtor  to  appropriate  the  mortgaged  property  to 
pay  the  debt,  it  is  binding  as  against  the  mortgagee  ;  but  if 
it  be  not  the  will  of  the  debtor,  and  the  property  is  seized 
upon  execution,  the  rights  of  the  mortgager  fasten  upon  the 
})roperty ,  and  take  it  away  from  the  execution  creditor.  Then 
the  property  is  not  held  by  the  mortgage,  but  by  the  will  of 
the  debtor;  because,  if  the  debtor  sees  proper  to  dispose  of 
it,  he  has  the  power  under  the  mortgage.  He  may  dispose 
of  the  property,  defeat  the  mortgage,  and  put  the  money  in 
his  own  pocket ;  but  if  he  refuses  to  pay  a  debt,  and  you 
seize  the  property  in  execution  against  his  will,  the  mortgage 
steps  in  and  restores  it  to  the  debtor.  The  whole  matter, 
then,  appears  to  rest  upon  the  option  of  the  debtor,  to  ap- 

73 


§    48         FRAUDULENT   :M0UTGAGES    OF   MERCHANDISE. 

propriate  the  mortgaged  property  to  the  payment  of  his 
debts  or 'not,  and  not  upon  the  mortgage.  No  reasoning 
Avill  change  this  result  if  a  mortgager  retains  possession  and 
the  full  power  of  disposition  over  the  mortgaged  property." 

"A  mortgage  upon  a  specific  article,  Avith  possession  and 
power  of  disposition  left  in  the  mortgager,  is  in  truth  no 
mortgage  at  all ;  it  is  no  certain  lien.  The  power  to  hold 
possession  and  dispose  of  the  property  is  inconsistent  with 
the  very  nature  of  a  mortgage.  It,  indeed,  would  not,  per- 
haps, be  going  too  far  to  say  that  such  an  instrument  was  a 
nullity." 

"As  to  all  the  world  except  the  parties  themselves,  such  a 
mortgage  will  be  held  void  as  against  the  policy  of  the  law." 

The  court  dissented  explicitly  from  the  doctrine  enunci- 
ated by  Mr.  Justice  Story,  in  Mitchell  v.  Winslow,^and,  re- 
ferring to  his  suggestion,  that  though  part  of  the  goods 
should  be  lost  to  the  creditor  by  sales,  others  might  be  sub- 
stituted by  consent,  replied ;  "  This  is  no  answer,  for  it  may 
be  that  others  will  not  be  substituted,  and,  if  we  look  to  ex- 
perience, in  all  cases  where  a  trader  has  felt  himself  bound 
to  mortgage  his  whole  stock,  it  is  not  the  usual  result." 
The  fallacy  adopted  by  a  class  of  logicians  represented  by 
Story  and  Lowell  is  then  pointed  out.  "The  whole  error 
appears  to  be  in  regarding  the  word  stock  as  a  fixed  thing 
which  must  always  remain,  the  same  as  a  horse  which  pre- 
serves his  identity,  although  in  process  of  time  every  parti- 
cle composing  him  may  be  thrown  off  and  renewed. ' '  ' ♦  The 
error  is  in  treating  a  ivord  as  a  thing,  mortgaging  a  word 
instead  of  a  substance,  and  permitting  the  substance  to  be 
sold,  while  the  mortgage  attaches  and  remains  fixed  to  the 
word." 

§48.  The  doctrine  adliered  to.  —  The  doctrine  thus 
comprehensively  stated  remains  the  law  in  Ohio.     Freeman 

I  2  Story,  630. 

74 


DOCTKIXE    OF   THE   AMERICAN   3IAJ0KITY.  §    48 

V.  Rawson  ^  was  another  case  where  the  agreement  that  the 
mortijaffer  should  continue  to  sell  the  merchandise  mort- 
gaged,  appeared  dehors  the  instrument ;  but  the  lower  court 
is  sustained  in  its  ruling  that  the  instrument  was  equally 
fraudulent  and  void  as  if  this  arrangement  had  appeared  on 
its  face.  The  ruling  in  Coburn  v.  Pickering,  as  to  a  secret 
trust,  is  referred  to  and  approved,  and  it  is  said:  "The 
mortgage  must  be  precisely  what  it  purports  and  professes 
to  be,  and  must  operate  an  absolute  surrender  of  the  prop- 
erty for  the  security  of  the  mortgagee."  "  What  possible 
arrangement  could  be  more  directly  inconsistent  w'ith  the 
nature  and  purposes  of  the  conveyance,  or  could  more  pal- 
pably secure  to  the  mortgager  all  the  beneficial  uses  of  the 
property,  than  the  power  to  use  and  dispose  of  it  for  his  own 
benefit?  It  is  simply  and  plainly  saying  that,  as  between 
the  parties,  the  mortgager's  enjoyment  of  and  dominion 
over  it  shall  be  no  less  than  before,  while  it  is  put  beyond 
the  reach  of  other  creditors." 

In  Harman  v.  Abbey  ^  the  mortgage  provided  nominally 
that  the  mortgagee  should  have  possession,  but  only  as 
against  all  other  persons  than  the  mortgager,  and  the  latter 
was  to  continue  the  business  at  retail;  while  no  provision 
was  made  as  to  the  proceeds  of  sales,  except  as  to  paying 
expenses.  This  arrangement,  which  merely  expressed  more 
plainly  in  terms  what  the  court  discovered  lurking  under 
the  surface  of  the  two  last  named  cases,  was,  in  accordance 
with  the  previous  ruling,  declared  absolutely  void  in  law. 

Goodenough  v.  Harris^  and  Morris  v.  Devon*  are  cases 
in  which  the  same  ruling  was  applied  in  the  inferior  courts. 

It  is  to  be  observed  particularly  that  before  Collins  v, 
Myers,  the  rule  was  already  well  established  in  Ohio  that 
retention  of  possession  alone,  after  a  bill  of  sale  of  chat- 


1  5  Ohio  St.  1.  3  1  Disney,  53. 

2  7  Ohio  St.  218.  *  2  Id.  218. 


75 


§    50  riiAUDULEXT    MOl'vTGAGES    OF    MEUCIIANDISE. 

tels,  whether  absolute  or  conditional,  would  furnish  only 
presumptive  evidence  of  fraud,  and  might  be  consistent 
with  an  honest  mtent,  or  open  to  explanation.^  This  rule 
was  adopted  at  a  time  when,  while  it  was  approved  in  New 
York,  it  had  been  rejected  by  Pennsylvania,  Connecticut, 
and  Vermont,  which  States  had  a})plicd  the  contrary  rule 
of  conclusive  fraud  to  such  cases. 

§  49.  Distinction  in  case  of  agency  for  the  mort- 
gagee.—  Brown  v.  Webb '-^  and  Kleine  v.  Katzenberger** 
do  not  vary  the  rule  adopted  in  Collins  v.  Myers.  In  the 
former  case,  the  mortgage  provided  that  the  mortgager 
should  make  sales  for  the  purpose  of  paying  the  mortgage 
debt,  but  the  mortgagees  took  immediate  possession,  and 
themselves  carried  out  this  provision,  which  was  held  a 
valid  transaction.  In  Kleine  v.  Katzenberger,  the  provi- 
sion of  the  mortgage  was  that  the  morto:ao:er  mii^ht  sell, 
but  only  in  order  to  raise  money  to  pay  over  to  the  mort- 
gagees on  their  debt,  and  the  court  followed  the  New  York 
courts  in  distinguishing  this  as  a  valid  transaction,  the  power 
of  sale  being  allowed  only  for  the  benefit  of  the  mortga- 
gees, and  being  "  entirely  consistent  with  the  idea  of  a  lien 
upon  the  goods  for  the  security  of  the  mortgagees,"  when 
the  arrangement  is  made  in  good  faith. 

Minnesota. 

§  50.  The  doctrine  adopted  in  Minnesota;  registration 
of  instrument  immaterial.  —  In  Minnesota,  a  similar  ruling 
was  made  as  to  a  mortgage  on  a  stock  of  goods  in  trade,  in 
the  first  reported  case  of  Chophard  v.  Bayard.*  The  doc- 
trine of  the  New  York  cases  was  approved,  and  it  was  held 
that  permission  to  the  mortgager  to  sell  the  goods  is  wholly 
inconsistent  with  the  idea  of  a  secw'ity,  and  leads  the  judi- 

1  Hombeck  v.  Vanmetre,  0  Ohio,  153  (1839).  »  20  Ohio,  389. 

8  20  Ohio  bt.  110 ;  5  Am.  Kep.  630  (1S70J.  *  4  Minn.  533. 

76 


DOCTRINE    OF    THE    AMERICAN   MAJORITY.  §    51 

cial  mind  irresistibly  to  the  conclusion  that  the  instrument 
was  made  for  some  other  purpose. 

This  doctrine  was  followed  in  Horton  v.  Williams,^  a 
case  of  a  mortgage  on  stock  and  farm  produce,  some  of 
which  the  mortgagee  had  allowed  the  mortgager  to  sell. 
The  rule  was  laid  down  in  this  case,  (and  also  in  Gere  v. 
]\Iarray-,)  that  the  province  of  the  jury  is  to  find  only  the 
facts  as  to  the  acts  or  intent  of  the  parties,  and  that  the 
court  is  to  declare  whether  such  acts  or  intent  are  fraudu- 
lent, as  a  question  of  law.  In  case  the  intent  of  the  parties 
be  inconsistent  with  the  idea  of  an  honest  security,  "  the  law 
declares  such  intent  fraudulent."  The  case  of  Chophard 
V.  Bayard  was  said  to  be  "  in  accordance  with  sound  prin- 
ciple and  the  weight  of  authority,"  in  holding  "that  such 
a  mortgage  was  necessarily  fraudulent,  as  against  the  mort- 
gager's creditors."  In  reference  to  the  question  of  regis- 
tration, as  affecting  this  doctrine,  the  court  said,  further: 
"The  law,  as  held  in  Chophard  v.  Bayard  and  Gere  v. 
Murray,  has  not  been  changed  by  the  act  requiring  chattel 
mortgages  to  be  filed,  unless  accompanied  by  immediate 
delivery,  and  followed  by  an  actual  and  continued  change 
of  possession  of  the  things  mortgaged.  Unlike  the  stat- 
utes of  Massachusetts  and  Iowa  on  this  subject,  our  statute 
does  not  make  the  filing  of  the  mortgage  legally  equivalent 
to  actual  delivery  and  continued  change  of  possession ;  but 
like  the  statute  of  New  York,  of  which  it  is  a  copy,  '  it 
merely  adds  another  to  the  grounds  on  which  a  mortgage 
of  personal  chattels  shall  be  void.'  "  ^ 

§  51.  Transaction  not  validated  by  act  of  mortgagee  in 
taking  possession  of  goods.  —  The  rule  was  further  af- 
firmed in  Stein  v.  Munch,*  as  to  a  mortsatre  on  a  retail 

1  21  Minn.  187. 

2  6  Id.  305. 

3  Citing  Wood  v.  Lowry,  17  Wend.  492,  and  Smith  v.  Acker,  £3  Id.  653. 
*  24  Minn.  390  (1878). 

77 


§  52    FRAUDULENT  MORTGAGES  OF  MERCHANDISE. 

stock  of  drugs  with  power  of  sale  reserved.  In  this  case» 
it  was  held  that  the  transaction  was  not  validated  by  the 
mortgagee  taking  possession  of  the  goods  under  and  by 
virtue  of  the  mortgage  ;  for  which  important  principle  the 
cases  of  Robinson  v.  Elhott,^  Delaware  v.  Ensign,^  Blakes- 
lee  v.Rossman,^  and  Janvrin  v.  Fogg*  were  cited,  all  which 
save  the  last  were  similar  cases  of  mortgages  on  stocks  of 
goods  in  trade. 

But  in  another  case  of  a  similar  mortgage,  heard  at  the 
same  torm,^  in  which  the  mortgager  had,  by  a  new  act,  vol- 
untarily turned  the  property  over  to  the  mortgagee,  for  the 
purpose  of  paying  in  part  the  mortgage  debt,  this  was  sus- 
tained as  a  valid  and  legal  transaction,  it  appearing  to  be 
bona  fide. 

The  rule  was  reaffirmed  as  the  settled  law  of  Minnesota, 
in  Mann  v.  Flower,*'  where  a  similar  mortgage  on  goods  in 
trade  was  held  fraudulent;  the  same  mortgage  having  been, 
in  Flower  v.  Cornish,^  held  valid  as  between  the  parties. 
In  this  as  in  the  preceding  cases,  the  adjudication  proceeds 
on  the  theory  of  the  fraudulent  intent  of  the  parties,  as  con- 
clusively proven  by  their  dealings. 

Wisconsin. 

§  52.  The  doctrine  applied  in  Wisconsin  ;  intent  of 
parties  immaterial.  — The  Minnesota  court,  in  Horton  v. 
Williams,  refers  approvingly  to  Place  v.  Langworthy  ^  and 
Steinart  v.  Dcuster,^  two  cases  in  Wisconsin,  involving 
mortgages  of  this  character.  Place  v.  Langworthy,  in  its 
turn,  is  professedly  based  on  Collins  v.  Myers, ^°  the  lan- 
guage of  which  is  quoted  and  adopted.     In  this  case  the 

1  22  Wall.  513.  s  25  Minn.  500  (1879). 

2  21  Barb.  85.  '  25  Id.  473. 

3  43  Wis.  116.  8  13  Wis.  629  (1861). 
*  49  N.  H.  340.  9  23  Id.  136. 

»  Bank  v.  Anderson,  24  Minn.  435.  ">  16  Ohio,  547. 

78 


DOCTRINE    OF    THE    AMERICAN    MAJORITY.  §    52 

provision  for  sales  was  exhibited  on  the  face  of  the  mort- 
gage. In  Steinart  v.  Deuster,  it  appeared  to  have  been 
agreed  on  verbally  between  the  parties.  But  the  two  cases' 
were  held  to  be  not  distinguishable  in  this  particular.  The 
duty  of  the  court  was  recognized,  so  soon  as  the  fact  is  con- 
ceded or  established  in  the  case,  to  expose  the  inherently 
vicious  tendencies  of  such  a  transaction,  and  to  rule  upon 
it  as  fraudulent  in  law.  Allowing  sales  of  the  mortgaged 
goods  by  the  mortgager  is  said  to  be  "  a  provision  directly 
calculated,  in  our  judgment,  to  hinder,  delay  and  defraud 
creditors."^  A  verbal  agreement  to  this  effect  is  no  less 
vicious  than  a  written  one. 

These  cases  established  the  doctrine  in  Wisconsin.  In 
Oliver  V.  Town,'^  the  trial  court  charged  the  jury  in  con- 
formity to  the  rulings  in  the  two  earlier  cases  ;  and  on  ap- 
peal, the  judgment  resulting  therefrom  was  sustained 
without  discussing  the  propriety  of  such  a  charge. 

The  Supreme  Court  of  Wisconsin  has  lately  been  invited 
to  revise  these  rulings,  but  it  has  by  a  full  bench  adhered 
to  them  in  the  most  decided  manner,  in  Blakeslee  v.  Ross- 
man;  ^  announcing  that  "  the  validity  of  such  a  mortgage  is 
not  an  open  question  in  this  State,"  and  expressing  the  be- 
lief that  the  rule  elsewhere  "  is  very  generally,  if  not  uni- 
versally, the  same  as  here."  The  terse  and  incisive 
language  of  Ryan,  C.  J.,  is  calculated  to  give  this  case  a 
leading  position  on  the  subject.  He  said:  "Intent  does 
not  enter  into  the  question.  Fraud  in  fact  goes  to  avoid 
an  instrument  otherwise  valid.  But  intent,  bona  fide  or 
mala  fide,  is  immaterial  to  an  instrument  per  se  fraudu- 
lent and  void  in  law.  The  fraud  which  the  law  imputes  to 
it  is  conclusive.  *  *  *  Fraud  in  fact  imputed  to  a  con- 
tract (valid  on  its  face)  is  a  question  of  evidence ;  not  fraud 
in  law.  And  no  agreement  of  the  parties  in  parol  can  aid 
a  written  instrument,  fraudulent  and  void  in  law." 

1  13  Wis.  629.  2  28  Wis.  828.  ^  43  ■^■^.  ^q  (1877). 

79 


§    53         FRAUDULENT    MOUTGAGES    OF    MEKCIIANDISE. 

It  being  urged  upon  the  court  that  a  seizure  of  the  goods 
in  this  case  by  the  mortgagee,  chiiming  under  the  mort- 
gages, had  given  him  a  valid  possession,  this  claim  was 
overruled  in  decisive  language,  it  being  considered  impossi- 
ble for  the  mortgagee  to  acquire  any  legal  rights  under  a 
transaction  so  fraudulent. 

§  53.  Distinction  in  case  of  agency  for  the  mortgagee; 
recent  cases,  —  The  still  later  case  of  Fisk  v.  Harshaw  i 
exhibited  the  fact  of  sales  of  the  mortgaged  goods  by  the 
mortgager  ;  but  it  turned  upon  the  question  of  the  weight 
of  evidence,  as  to  whether  the  mortgagee  had  allowed  the 
mortgager  to  apply  any  of  the  proceeds  of  the  sales  to  his 
own  use;  it  was  claimed  that  the  proceeds  were  all  to  be 
remitted  to  the  mortgagee;  and  the  finding  in  the  lower 
court  in  favor  of  the  mortgagee  on  these  points  was  sus- 
tained, upon  the  weight  of  evidence,  by  the  majority  of  the 
court,  without  withdrawing  or  detracting  from  the  authority 
of  Blakeslee  v.  Rossman  or  the  preceding  cases.  Cotton  v. 
Marsh  ^  was  cited  and  approved,  Avhere  the  mortgagee  of  a 
stock  of  goods,  by  his  agent,  put  the  mortgager  in  posses- 
sion, with  instructions  to  sell  and  remit  the  proceeds  ;  and 
this  was  held  to  be  an  arrangement  not  necessarily  fraudu- 
lent, but  valid  if  free  from  fraudulent  intent. 

On  similar  principles,  sales  of  mortgaged  chattels  by  the 
mortixager,  without  the  knowledge  or  consent  of  the  mort- 
ira<Tce,  will  not  have  the  effect  to  avoid  the  mortgase.'^ 

The  recent  case  of  David  y.  Birchard  *  involved  a  chattel 
morto'age  on  a  stock  of  goods,  but  the  report  does  not  dis- 
close any  reservation  by  the  mortgager  of  a  power  of  sale 
of  the  goods,  and  the  case  was  litigated  on  the  question  of 
fraudulent  intent. 

In  Rice  v.  Jerenson,^  though  the  mortgage  was  one  of  a 

1  45  Wis.  665  (1878).  "  53  Id.  492. 

2  3  Id.  221  (1854).  *  54  Id.  248. 
*  Barkow  v.  Sanger,  47  Id.  500. 

80 


DOCTKIXE    or    THE    AMERICAN    MAJORITY.  §    54 

stock  of  goods  with  a  reserved  power  of  sale,  the  question 
of  inherent  fraud  in  such  a  conveyance  was  not  involved  or 
discussed  ;  the  only  question  in  connection  with  the  convey- 
ance being  whether  it  furnished  sufficient  proof  of  an  intent 
to  defraud  to  warrant  the  issuance  of  a  statutory  attach- 
ment. The  evidence  showing  no  intent  to  defraud,  no 
ground  appeared  for  the  attachment,  which  was  accordingly 
dissolved.  This  case  thus  illustrates  in  another  form  the 
entire  immateriality  of  the  intent  of  the  parties,  in  deter- 
mining the  fraudulent  character  of  a  reserved  power  of 
sale.  Though  the  mortgage  in  question  was  essentially 
fraudulent,  under  Blakeslee  v.  Rossman,  it  yet  furnished  no 
proof  whatever  of  fraudulent  intent. 

Illinois. 

§  54.  The  doctrine  applied  in  Illinois  ;  registration  of 

instrument  immaterial.  —  In  Illinois  it  was  urged  upon  the 
consideration  of  the  Supreme  Court,  in  Davis  v.  Ransom,^ 
that  the  statute  of  that  State  allowing  possession  by  the 
mortgager  of  chattels  for  two  years,  in  case  the  mortgage 
be  recorded,  had,  as  intimated  by  Lowell,  J.,  in  Brett  v. 
Carter,  met  all  the  difficulties  of  Twyne's  Case,  so  as  to 
validate  the  mortgage  in  question.  But  the  court  was  not 
blind  to  the  fact  that  possession  and  publicity  were  minor 
matters,  compared  with  the  reservation  of  a  power  of  sale  ; 
and  the  difference  was  plainly  pointed  out.  Said  the  court : 
"  The  statute  contemplates  the  retaining  of  possession  by 
the  mortgager  of  chattels  capable  of  descriptioji  and  identi- 
fication only,  and  the  retaining  of  such  possession  for  use 
or  custody i  and  not  for  sale  and  disposition  in  the  course 
of  business  and  trade."  This  accords  with  the  ruling  in 
Horton  v.  Williams,"  that  such  statutes  do  not  change  the 
rules  of  the  common  law,  but  "  merely  add  another  to  the 
grounds  on  which  a  mort^ao-e  of  chattels  shall  be  void." 

1  18  111.  396  (1857).  2  j^nte,  sect.  50. 

fi  81 


§  54    FRAUDULENT  MORTGAGES  OF  MERCHANDISE. 

In  Davis  v.  Ransom  a  stipulation  on  the  face  of  the  mort- 
gage allowed  the  mortgager  to  sell  the  goods  in  the  usual 
course  of  trade,  with  a  proviso  that  the  proceeds  should  be 
paid  over  to  the  secured  creditors.     The  mort^airer  had 

J-  Do 

paid  over  certain  of  the  proceeds  to  one  of  said  creditors, 
and  thus  fajr  had  manifested  an  intent  not  fraudulent.  Not- 
withstandingthis,  the  inherent  vice  of  the  arrangement  was 
relentlessly  exposed  by  the  court.  "  This  instrument  does 
not  provide  for  possession  remaining  with  the  mortgager 
within  the  meaning  of  the  statute,  but  seeks,  under  cover 
of  a  mortgage,  to  enable  the  mortgager,  in  defiance  of  his 
creditors,  to  retail  goods  according  to  the  course  of  mer- 
chants, and  is  against  the  evident  policy  of  the  statute.  In 
effect,  this  instrument  is  no  less  than  an  assignment  or  bill 
of  sale  of  a  stock  of  goods,  reservinc?  to  the  assio;uor  the 
absolute  dominion  "and  power  of  disposition  for  the  period 
of  fifteen  months,  during  which  time  it  contemplates  that 
the  assignor  shall,  w^ith  the  goods,  carry  on  his  business  of 
storekeeping  as  by  him  heretofore  followed ;  that  what  he 
should  add  to  the  stock  should  enure  to,  and  become  a  part 
of,  the  assigned  or  mortgaged  property  ;  and  that,  for  this 
period,  the  creditors  of  the  assignor  should  be  hindered  in 
subjecting  the  property  to  the  satisfaction  of  their  legal  de- 
mands. *  *  *  Xhe  law  gives  no  sanction  to  such  ar- 
rangements, and,  however  well  intended  in  fact,  will  hold 
them  void  as  a2;ainst  creditors,  as  tendino;  to  encourage  and 
sustain  frauds,  and  to  hinder  creditors  in  the  collection  of 
their  just  demands." 

Read  v.  Wilson^  was  a  like  case,  with  a  like  clause  in  the 
mortgage  ;  but  here  the  mortgagees  had,  in  fact,  taken  pos- 
session under  the  mortgage  before  the  contest  arose,  even 
before  the  execution  creditor  had  taken  out  his  execution, 
and  they  had  commenced  and  continued  for  some  time  the 
sale  of  the  goods  for  the  satisfaction  of  their  debt ;   and  the 

1  22  111.3  77. 
82 


DOCTFwIXE    OF    THE    AMERICxYN   IVI^VJORITY.  §    55 

court  held  that  they  were  protected  by  their  possession  un- 
der the  circumstances  of  the  case,  without  abandoning  the 
principles  settled  in  the  former  case. 

In  Barnet  v.  Fergus  ^  the  mortgage  covered  a  "  stock  in 
trade"  among  other  things,  but  did  not  on  its  face  grant 
permission  to  the  mortgager  to  sell  the  goods ;  this  permis- 
sion appeared  by  evidence  to  have  been  given  aliunde. 
The  court  re-affirmed  it  decisions  that  such  an  agreement 
on  the  face  of  the  instrument  amounted  to  "  fraud  inlaw;  " 
and,  as  to  the  particular  case,  held  that  such  permission 
granted  "  would  be  such  a  perversion  of  the  mortgage  from 
its  legitimate  purposes  as  to  withdraw  from  its  protection, 
and  place  within  the  reach  of  other  creditors,  all  the  prop- 
erty which  the  mortgagee  had  permitted  the  mortgager  to 
hold  for  sale  in  the  ordinary  course  of  his  business." 

This  court  had  previously  decided,  in  Ogden  v.  Stewart,^ 
that  in  a  case  like  Barnet  v.  Fergus,  all  lien  of  the  mort- 
gage is  lost  by  a  sale  of  the  goods,  and  that  the  vendee 
from  the  mortgager  acquires  a  title  to  them.  In  the  last 
named  case,  the  distinction  is  taken  that  as  the  morto-asre 
was  on  its  face  free  from  any  imputation  of  a  fraudulent 
agreement,  the  permission  by  the  mortgagee  that  sales  be 
made  by  the  mortgager  affected  his  lien  only  as  to  that  por- 
tion of  the  goods  allowed  to  be  sold,  and  it  was  unaffected 
as  to  those  goods  which  were  not,  directly  or  by  implication, 
covered  by  the  permission  to  sell. 

§  55.  The  doctrine  adhered  to  in  Illinois.  —  Cleaves  v. 
Herbert^  might  possibly  induce  doubts  as  to  the  intention 
of  the  Illinois  Supreme  Court  to  adhere  to  this  rule.  The 
case  was  a  chattel  mortgage  on  a  stock  of  liquors  and  saloon 
furniture  and  fixtures,  contained  in  a  "  saloon,"  the  grantor 
to  "  retain  possession  of  said  property,  and  at  his  own 
expense  to  keep,  and  to  use  and  enjoy  the  same  until  de- 

1  51  111.  352.  2  29  Id.  122.  ^  gi  id,  126. 

83 


§  55     FKADULEXT  MORTGAGES  OF  MERCHANDISE. 

fault,"  etc.  The  Appellate  Court  could  not  see  that  to 
"  keep,  use  and  enjoy"  this  property  was  designedly  to 
allow  the  grantor  to  sell  it,  but  thought  it  possible  the  jury 
had  considered  the  keeping  of  the  liquors  intact  for  the 
purpose  of  improvement  by  age,  the  "  use"  of  it  meant 
in  the  conveyance.  Hence  the  verdict  of  the  jury  in  favor 
of  the  transaction,  upon  contlicting  evidence,  was  allowed 
to  stand.  But  doubtless,  this  case,  like  Fisk  v.  Harshaw^ 
and  Yates  v.  Olmstead,^  is  to  be  taken  only  as  an  adjudica- 
tion upon  the  province  of  the  jury  to  settle  disputed  ques- 
tions of  evidence  ;  inasmuch  as  we  find  this  court,  less  than 
four  years  later,  holding,  in  Simmons  v.  Jenkins,^  that  any 
such  arranofement  between  mortg-ager  and  mortfjao-ee, 
whether  express  or  implied,  even  if  proven  by  circum- 
stances, to  allow  sales  at  retail  by  the  mortgager,  will  ren- 
der the  conveyance  unavailing  as  against  creditors.  There 
is  also  a  plain  adherence  to  the  rule  of  Barnet  v.  Fergus,  in 
the  later  case  of  Goodheart  v.  Johnson,*  where  the  same 
court  sustain  the  conveyance  then  in  dispute ;  carefully  dis- 
tinguishing the  case  from  Barnet  v.  Fergus  by  the  fact  that 
the  sale  made  in  this  case  was  for  the  express  account  of, 
and  under  the  direction  of  the  mortgagee,  except  in  three 
instances  where  inconsiderable  portions  of  the  property 
were  sold  by  the  mortgagee  for  his  own  benefit,  which  were 
thought  not  sufficient  to  invalidate  the  otherwise  legal  tranS' 
action. 

But  the  question  is  placed  beyond  doubt  by  the  more  re- 
cent cases  of  Greenebaum  v.  Wheeler"  and  Dunnino;  v. 
Mead,^  both  decided  at  the  September  term,  1878.  In 
Greenebaum  v.  Wheeler  the  chattel  mortgage  was  on  the 
materials  and  stock  in  business  of  a  carriage  factory,  the 
mortgager  continuing  the  business  and  making  sales,  and  re- 
taining a  certain  sum  per  month  for  the  use  of  himself  and 

1  Ante,  sect.  53.  3  75  m.  479^  5  90  Jd.  296. 

'  Ante,  sect.  41.  «  88  Id.  58.  «  90  Id.  376. 

84 


DOCTRINE    OF    THE    AMERICAN    MAJORITY  §    56 

family.  The  court  said:  *'  If  this  was  not  intended  to  de- 
fraud other  creditors,  it  certainly  was  well  calculated  to  do 
so,  as  it  placed  all  of  Reach's  property  beyond  their  reach 
for  fifteen  months,  and  enabled  him  to  carry  on  his  business 
with  the  property  precisely  as  though  it  was  not  incum- 
bered. *  *  *  Such  a  transaction  must  be  held  to  be 
against  the  policy  of  the  law,  as  tending  to  delay  and 
defraud  creditors.  If  such  mortgages  or  pledges  were 
sanctioned,  it  would  form  one  of  the  most  convenient 
and  effectual  means  of  hindering  and  delaying  credit- 
ors in  collecting  their  debts  that  could  be  devised."  In 
Dunning  v.  Mead,  the  mortgage  covering  a  stock  in  trade 
was  valid  on  its  face,  inasmuch  as  it  did  not  stipulate  for 
sales  by  the  mortgagers.  But  on  the  day  after  its  execu- 
tion, the  mortgagees,  by  letter,  authorized  the  mortgagers 
to  continue  to  sell  the  mortgaged  property  at  retail,  and  re- 
tain the  proceeds  subject  to  their  order.  It  appeared  in 
proof  that  this  was  used  as  a  cover  to  enable  the  morto-ao-ers 
to  appropriate  the  proceeds  to  their  own  use.  The  court 
sustained  the  instruction  to  the  jury  that  this  mortgage  was 
void  as  to  creditors,  saying  that  it  had  "  been  repeatedly 
held  by  this  court "  that  such  a  transaction  was  fraudulent, 
and  referring  to  the  cases  above  cited. 

Missouri. 

§  56.  The  doctrine  as  applied  in  Missouri.  —  The  Su- 
preme Court  of  Missouri  at  first  held  that  sales  unaccompa- 
nied by  possession,  whether  absolute  or  conditional  in  their 
terms,  were  in  law  fraudulent  and  void  per  se,  independent 
of  statutes  respecting  fraudulent  conveyances,  and  indepen- 
dent of  the  intentions  of  the  parties.  See  Eocheblave  v. 
Potter,-  Foster  v.  Wallace,'^  Sibly  v.  Hood,^  and  King  v. 
Bailey ;  *  these  decisions  extending  over  the   period  from 

1  1  Mo.  561 ;  14  Am.  Dec.  405.  3  3  /^,  090. 

=  2  7rf.  231.  •         *  6  Id.  575. 

85 


§    56  FKAUDULENT   MORTGAGES    OF    3IERC1IANDI1SE. 

1825  to  1840.  But  in  1841  this  rule  was  completely  aban- 
doned, and  in  Shepherd  v.  Trigg,^  Koss  v.  Crutsinger,-  and 
King  V.  Bailey,^  the  contrary  rule  was  established  that  pos- 
session left  with  the  vendor  raises  no  question  of  fraud  in 
law,  but  merely  a  question  of  fraud  in  fact,  to  be  submitted 
to  the  Jury.  It  is  somewhat  remarkable  that  King  v.  Bai- 
ley, in  6  Mo.,  appears  to  be  the  same  case  which  is  decided 
in  a  precisely  opposite  manner  in  8  Mo.  When  this  court, 
in  1848,  was  confronted  with  a  case  of  a  trust  deed  on  a 
stock  of  goods  in  trade,  it  was  at  first  evidently  embarrassed 
by  the  prominence  given  in  its  earlier  decisions  above  cited 
to  the  question  of  possession  alone  ;  and  was  led  to  sustain 
the  transaction  in  question  on  the  ground  that  no  provision 
for  sales  by  the  grantor  appeared  on  the  face  of  the  deed, 
notwithstanding  the  fact  appeared  that  sales  at  retail  were 
regularly  made  with  the  assent  of  the  creditor.*  But  in 
subsequent  cases  in  which  the  power  of  sale  was  reserved 
to  the  grantor  on  the  face  of  the  instrument,  this  was  held 
fraudulent  and  void  in  law,  there  being  no  question  of  fact 
to  go  to  the  jury  ;  ^  even  in  case  the  instrument  bound  the 
grantors  to  apply  the  proceeds  of  sales  to  the  replenishment 
of  the  stock  ;^  and,  also,  where  the  vicious  provision  does 
not  appear  in  terms  on  the  face  of  the  deed,  but  is  neces- 
sarily implied  from  other  provisions,  as  in  Stanley  v.  Bunce' 
and  Billingsley  v.  Bunce,^  where  the  deeds  covered  all  the 
merchandise,  which  the  grantor  might  "  at  any  time  within 
twelve  months  purchase  for  the  purpose  of  renewing  or  re- 
plenishing said  stock."  This  clause,  it  was  held,  neces- 
sarily implied  that  the  grantor  "  should  retain  possession  of 

1  7  Mo.  151.  8  Walter  v.  Wimer,  24  Id.  63. 

«  7  Id.  245.  '  27  Id.  269. 

»  8  Id.  332.  «  28  Id.  647. 

*  Milburn  v.  Waugh,  11  Id.  369. 

5  Brooks  V.  Wimer,  20  Id.  503 ;  Martin  v.  Maddox,  24  Id.  475 ;  Martin  i>. 
Rice,  24  Id.  581. 
86 


DOCTRINE    OF    THE    A3IEUICAN    MAJORITY.  §    56 

his  goods  and  proceed  with  his  business  as  a  merchant." 
These  principles  are  reaffirmed  in  Armstrong  v.  Tuttle^  and 
Lodge  V.  Samuels,^  and  so  stands  the  hiw  in  jNli.ssouri.  It 
is  true  the  Supreme  Court  of  this  State  found  itself,  in 
State  V.  Tasker^  and  Voorhis  v.  Langsdorf,*  embarrassed 
in  construing  deeds  that  covered  goods  *'  which  may  be 
added  from  time  to  time  to  said  stock,"  and  "  all  things 
whatsoever  now,  or  that  may  be  hereafter,  used,  bouglit,  or 
belong  to  the  said  party  of  the  first  part  in  the  course  of 
his  usual  trade  or  business;"  and  was  miable  to  find  in 
these  provisions  an  intent,  necessarily  implied,  to  reserve 
the  power  of  sale  in  the  usu-al  course  of  business.  So  the 
instruments  in  these  cases  were  upheld,  while  the  principle 
governing  the  earlier  cases  was  still  recognized.  But  the 
court  had,  in  Reed  v.  Pelletier,^  applied  the  rule  that  an 
agreement  of  the  grantee  to  allow  the  grantor  to  continue 
selling  the  goods,  could  be  established  by  very  slight  evi- 
dence, so  as  to  defeat  the  conveyance ;  and  in  Hall  v.  Webb,^ 
Napton,  J.,  who  prepared  the  opinions  in  the  two  cases  in 
31  Mo.,  had  expressly  disavowed  the  authority  of  Judge 
Story's  opinion  in  Mitchell  v.  Winslow,^  and  antagonized 
his  views.  Lodge  v.  Samuels,  in  its  turn,  had  tended  to  a 
renunciation  of  the  exceptions  adopted  in  State  v.  Tasker 
and  Voorhis  v.  Langsdorf .  There  the  mortgage  conveyed 
'*  the  entire  stock  in  the  broom-making  business  lately 
owned  by"  the  grantors,  "consisting  of  all  the  broom- 
corn  on  hand,  and  all  the  brooms  and  machinery,"  and  left 
the  grantors  in  possession.  From  these  recitals  the  plain 
meaning  was  inferred  that  the  grantors  were  to  continue  to 
manufacture  and  sell  brooms  ;  and  the  deed  was  declared 
fraudulent  and  void  upon  its  face. 

'  34  Mo.  432.  5  28  Id.  173. 

*  50  Id.  204  (1872).  6  28  Id.  408. 

3  31  /(/.  445.  '  2  Story,  630. 

*  31  Id.  451. 

87 


§  50    FRAUDULENT  MORTGAGES  OF  MERCHANDISE. 

But  in  the  later  cases  of  Weber  v.  Armstrong^  and 
Hewson  v.  Tootle,^  this  court  disregarded  Lodge  v.  Sam- 
uels on  this  point,  and  returned  to  the  exceptions  an- 
nounced in  State  v.  Taskcr  and  Voorhis  v.  Lansrsdorf. 
It  is  plain,  however,  that  the  distinctions  introduced  by 
these  decisions  into  the  jurisprudence  of  Missouri  are 
technical,  and  relate  to  the  questions  of  evidence  and 
procedure,  and  in  no  way  affect  the  substantial  law 
of  the  subject.  The  substantive  rule  adopted  in  the 
earlier  cases  is  expressly  recognized  and  approved.  But 
it  is  considered  that  the  court  should  draw  no  conclu- 
sions from  certain  equivocal  language  in  the  deed,  be- 
cause it  is  so  easy  to  introduce  evidence  as  to  the  extent 
to  which  sales  were  actua.lly  made  by  the  mortgager,  and 
then  let  the  jury  find  the  facts.  In  Voorhis  v.  Langsdorf ' 
it  was  said :  "  The  court  is  not  called  upon  or  warranted  in 
pronouncing  a  deed  void  upon  a  mere  conjecture.  It  is 
easy  to  show,  aliunde,  how  the  truth  is,  and  go  to  the  jury 
on  the  facts.  If  they  are  satisfied  that  this  was  the  under- 
standing and  intention  of  the  parties,  where  the  deed  may 
be  silent  on  the  subject,  the  same  result  follows  as  though 
there  was  an  express  or  implied  stipulation  in  the  instru- 
ment. The  jury  will  pronounce  it  void,  under  instructions 
from  the  court,  if  the  evidence  warrants  such  a  conclusion." 
And  this  was  the  purport  of  the  distinctions  taken  in  the 
later  cases  above  referred  to.  In  Weber  v.  Armstrong, 
where  there  was  no  evidence,  outside  the  instrument,  of  an 
agreement  to  allow  sales,  the  court  found"  not  a  syllable  in 
the  instrument  from  which  it  can  be  fairly  implied,  much  less 
from  which  it  must  necessarily  be  implied,  that  the  grantors 
were  to  have  the  power  to  sell."  In  Hewson  v.  Tootle,  the 
court  found  considerable  evidence  to  support  the  view  that 
the  sales  were  allowed  only  to  raise  money  to  be  applied  on 

1  70  Mo.  217  (1879J.  *  72  Mo.  632  (1880).  »  31  Mo.  451. 

88 


DOCTRINE    OF   THE   AMEUICAX   JUAJORITY.  §    57 

the  mortgage  debt.  In  the  first  case,  the  judgment  was 
reversed  and  the  case  was  remanded  for  a  new  trial,  in  con- 
formity with  the  law  as  stated  in  Brooks  v.  Winier,  Stan- 
ley V.  Bunce,  and  Billingsley  v.  Bunce,  namely,  that  if 
"  the  grantor  is  to  retain  possession  with  a  power  of  sale, 
the  court  will  declare  the  deed  to  be  void  as  a  matter  of 
law;  "  which  rule  was  in  no  way  affected  by  anything  said 
in  the  last  named  case  of  Hewson  v.  Tootle. 

§  57.  The  doctrine  adhered  to  ;  intent  of  parties  im- 
material. —  The  rule  of  Brooks  v.  AYimer  and  the  earlier 
cases  was  expressly  affirmed  and  applied  in  "White  v. 
Graves,^  to  a  case  where  the  goods  mortgaged  were  to  be 
retained  by  the  mortgager  "  as  stock  in  trade,"  from  which 
it  appeared  to  the  court  that  "  the  goods  were  to  remain  in 
possession  of  the  grantor  and  be  disposed  of  in  the  usual 
«ourse  of  business."  It  was  applied  also  as  settled  law,  by 
the  St.  Louis  Court  of  Appeals,  in  State  v.  Jacob,^  Cator  v. 
Collins,^  and  State  v.  Mueller;'*  audit  was  recognized  as 
such  in  Greeley  v.  Reading.^ 

Throughout  these  cases  in  Missouri  runs  the  idea,  dis- 
tinctly expressed,  that  the  applicability  of  this  rule  does 
not  depend  in  any  manner  upon  the  intentions  of  the  par- 
ties. Frequently,  it  is  expressly  declared  as  a  distinct  rule 
of  law,  that  the  tendency  of  these  transactions  is  fully  as 
fraudulent  as  would  be  a  fraudulent  intent  of  the  parties ; 
these  two  elements  of  actual  fraud  being  clearly  distin- 
guished.^ In  State  v.  Mueller,^  the  language  of  the  court 
was :  "The  intentions  of  all  parties  may  have  been  excellent, 
but  the  arrangement  is  one  which  the  law  will  not  allow  an 
insolvent  debtor  to  make." 

1  68  Mo.  218  (1878).  3  o  Mo.  App.  225. 

''  2  Mo.  App.  183  (1876)  MOM  87. 

5  74  Mo.  309  (1881). 

^  State   V.   Tasker,  State   v.  Jacob,   Brooks    v.  Wimer,    supra;    State  v. 
D'Oench,  31  Mo.  453. 
T  10  Mo.  App.  87. 

89 


§  59    FRAUDULENT  MORTGAGES  OF  MERCHANDISE. 

Thompson  v.  Foerstel  ^  was  distinguished  from  the  cases 
above  referred  to,  by  the  circumstance  that  tlie  power  of 
sale  of  the  property  (consisting  of  horses,  cattle,  wagons, 
and  farm  utensils)  was  to  be  exercised  only  by  consent 
of  the  niortixaiiee,  and  the  proceeds  thereof  were  all  still  to 
remain  under  the  lien;  which  arrangement  was  sustained  as 
valid.  In  Nash  v.  Norment,^  where  the  mortgage  itself  was 
declared  invalid  as  a  security,  the  new  transaction  of  the 
delivery  of  the  property  was  held  to  give  the  mortgagee  a 
title  thereto. 

§  58.  Liimitations  upon  the   application  of  the  rule. — 

If  it  be  stipulated  that  all  the  proceeds  of  sales  made  by  the 
grantor  while  he  remains  in  possession,  shall  be  applied  to 
the  payment  of  the  debts  secured,  presumptions  will  in  Mis- 
souri be  in  favor  of  the  transaction,  and  it  will  be  sustained 
in  the  absence  of  evidence  tending  to  show  that  the  pro- 
ceeds of  sales  were  not  so  applied.^ 

The  application  of  the  rule  in  Missouri,  is  in  practice 
subject  to  the  limitation  that  the  fraudulent  mortgage  will 
be  void  only  as  to  those  goods  which  are  subject  to  such  a 
power  of  sale,  and  will  be  valid  as  to  the  residue;  *  a  doc- 
trine which  is  disallowed  in  some  of  the  States. 

Tennessee. 

§  59.  Early  cases  in  Tennessee.  —  Conflicting"  deci- 
sions.—  In  Tennessee,  early  cases  had  applied  a  similar 
rule  to  mortgages  upon  property  consumable  in  the  use, 
holding  that  the  reservation  of  possession  and  use  in  such 
cases  was  necessarily  a  reservation  for  the  benefit  of  the 
debtor,   and    therefore  fraudulent;  ^    and    those   decisions 

1  10  Mo.  App.  290. 

2  5  Mo.  App.  545. 

2  Metzner  v.  Graham,  57  Mo.  404;  Hewson  v.  Tootle,  f»tpra. 
*  State  V.  D'Oench,  31  Mo.  453;  Donnell  v.  Byern,  69  Mo.  468. 
5  Sommerville  v.  Horton,  4   Yerg.   540;   26  Am.  Dec.  242;    Simpson  v, 
Mitchell,  8  Yerg.  416. 
90 


DOCTRINE    OF    THE   AMERICAN   MAJORITY.  §    59 

were  followed  as  authority  in  Alabama,  Massachusetts, 
Missouri,  Mississippi,  and  other  States  —  in  some  of  them 
being  relied  on  as  applying  in  principle  to  the  cases  of 
mortgages  on  stocks  of  goods.  It,  therefore,  appears  sin- 
gular that,  in  respect  to  the  latter  class  of  cases,  there 
should  have  been  any  doubt  or  vacillation  exhibited  in  the 
Tennessee  decisions.  But  the  reservation  to  the  use  of  the 
grantor  by  way  of  sale  of  the  mortgaged  goods  has  not  al- 
ways appeared  as  clear  to  the  Supreme  Court  of  this  State 
as  has  the  reservation,  intrinsically  no  plainer,  by  way  of 
use  and  consumption.  In  the  first  case  which  arose.  Gait 
V.  Dibrell,^  it  took  but  few  words  to  determine,  without 
reference  to  authorities,  that  a  reserved  power  of  sale  made 
such  a  mortgage  fraudulent  and  void  in  law,  though  there 
was  no  fraud  in  fact,  and  nothing  more  was  intended  than 
an  honest  design  to  secure  a  just  debt ;  because  such  a  res- 
ervation "  is  totally  inconsistent  with  the  rights  of  other 
creditors,  and  of  necessity  vitiates  "  the  transaction.  In 
Peacock  v.  Tompkins,^  the  deed  of  trust  secured,  besides 
certain  bona  fide  debts,  an  indebtedness  which  was  created 
only  to  represent  a  sum  to  be  advanced  to  the  grantor  for 
the  support  of  himself  and  family,  and  for  the  further  con- 
duct of  his  business ;  and  it  was  declared  to  be  for  this 
reason  fraudulent  by  operation  of  law,  without  reference 
to  the  intention  of  the  parties.' 

Saunders  v.  Turbeville*  tended  to  a  contrary  rule, 
though  not  decisive.  There  a  sort  of  qualified  joint-posses- 
sion between  the  grantor  and  trustee  was  provided  for  ;  but, 
in  fact,  the  grantor  had  possession  and  control  for  his  own 
purposes  and  benefit,  without  regard  to  the  deed  of  trust. 
The  arrangement  was  sustained  as  a  valid  security,  on  the 

>  10  Yerg.  145  (1836). 

2  Meigs,  317  (1838). 

^  See  a  similar  case  in  Conn.,  cited  in  sect.  80. 

*'  2  Hum.  272. 

91 


§  60    FRAUDULENT  MORTGAGES  OF  MERCHANDISE. 

ground  that  the  debtor's  offence  in  using  the  property  for 
his  own  benefit  was  a  slight  one,  and  was  committed  with- 
out the  knowledge  or  assent  of  the  creditors  secured  by  the 
deed  of  trust. 

But  in  Doyle  v.  Smith/  where  the  terms  and  circum- 
stances of  a  general  assignment  for  creditors,  to  a  trustee 
who  took  possession,  showed  that  the  main  object  of  the 
transaction  was  the  continuance  of  the  debtor's  business, 
the  plain  intent  to  reserve  a  benefit  to  the  latter  was  held 
sufiicient  to  vitiate  the  entire  transaction.  The  pendulum 
oscillated  to  the  other  extreme  in  Hickman  v.  Perrin,-  where 
the  objections  to  a  reserved  power  of  sale  were  abandoned, 
and  a  mortgage  on  a  stock  of  goods  was  sustained  on  the 
two  grounds,  drawn  from  the  Michigan  case  of  Gay  v.  Bid- 
well,^  first,  that  no  creditors  appeared  with  claims  older 
than  the  mortgage,  and  that  subsequent  creditors  could  not 
complain  of  the  transaction,  (as  if  it  were  like  a  voluntary 
conveyance),  and  second,  to  hold  that  a  merchant  could  not 
make  such  a  mortorao'e  without  closincr  his  doors  would  be 
to  hold  that  no  merchant  could  mortgage  his  stock. 

§  60.  The  question  settled  ;  Bank  v.  Ebbert,  and  later 
cases. — But  ail  these  aberrations  have  been  corrected  in 
the  case  of  Tennessee  National  Bank  v.  Ebbert,*  where  a 
trust  deed  upon  a  stock  of  goods  allowed  the  grantors  to 
continue  their  business,  making  sales  as  before,  and  to  re- 
plenish their  stock  from  time  to  time,  but  professed  to  make 
this  "  subject  to  all  the  provisions  of  the  trust."  In  a  full 
and  logical  opinion,  the  characteristics  of  such  mortgages 
are  freely  and  thoroughly  examined,  and  the  correct  rule  is 
laid  down  with  such  perspicuity  as  to  give  to  this  case  a 
leading  position   on  the  subject.     The  peculiar  views  ad- 

i  1  Cold.  15. 
2  6  Cold.  135. 

*  7  Mich.  519. 

*  9  Heis.  153;  2  So.  Law  Rev.  (1st  series)    175,  (1S72). 

92 


DOCTKIXE    OF    THE    AMERICAX    MAJORITY.  §    60 

vanced  in  Hickman  v.  Perrin  are  expressly  repudiated.  It 
is  said:  "Admitting  that  there  was  no  specilic  intent  to  de- 
fraud any  particular  creditor,  or  no  actual  fraud  in  fact, 
yet  here  are  such  facilities  for  fraud,  contracted  for  on  the 
face  of  the  deed,  that  it  must  be  held  as  wantino;  in  lesral 
good  faith,  on  the  plain  principle  that  every  reasonable  man 
is  presumed  to  intend  the  probable  consequences  of  his  own 
acts  ;  and,  besides,  there  is  clearly  a  benefit  contracted  for 
to  the  grantors  on  the  face  of  the  deed,  and  a  prejudice  to 
the  rights  of  other  creditors."  "  We  hold  that  the  deed  of 
trust  in  question  cannot  be  sustained,  on  the  plain  principle 
that  it  does  hinder  and  delay  creditors  in  the  enforcement  of 
their  claims,  not  by  a  bona  fide  appropriation  of  the  prop- 
erty of  the  debtor  to  the  payment  of  his  preferred  creditor, 
which  Avould  be  allowable,  but  by  placing  it  in  his  own  pos- 
session and  control,  with  absolute  power  of  disposition,  and 
the  means  of  using  the  proceeds  for  his  own  benefit,  as  before 
the  conveyance  ;  and  that  such  stipulations  are  not  only  in- 
consistent with  the  idea  of  a  mortgage,  but  tend  inevitably 
to  give  a  fraudulent  advantage  to  the  debtor  over  his  other 
creditors,  while  his  property  is  protected  by  being  in  the 
name  of  a  trustee."  "  The  rule  we  lay  down  in  this  case 
requires  only  that  there  be  a  bona  fide  and  certain  appropri- 
ation of  the  property  for  the  benefit  of  a  creditor ;  not  a 
colorable  one,  in  which  the  creditors  have  only  a  contingent 
interest,  dependent  on  the  good  faith  of  the  assignor,  while 
the  assignor  himself  has  an  equally  certain  interest  secured 
to  him." 

This  rule  remains  the  law  in  Tennessee.  It  was  applied 
in  the  case  of  Woodward  v.  Goodman,^  to  a  somewhat 
different  instrument,  in  which,  however,  the  reservation  for 
the  grantor  appeared  in  the  provision  allowing  him  to  con- 
tinue to  use  the  property  conveyed  by  deed  in  trust,  while 
the  trustee  could  not  sell  it,  and  the  creditors  could  thus 

1  3  Cent.  L.  J.  43. 

93 


§  61    FRAUDULENT  MORTGAGES  OF  MERCHANDISE. 

have,  not  the  property,  but  only  the  profits  derived  from  its 
use,  subjected  to  their  demands.  Under  the  principles  set- 
tled in  Doyle  v.  Smith  and  Bank  v.  Ebbert,  this  trust-deed 
was  declared  void  on  its  face. 

The  rule  was  again  expressly  applied  in  the  later  case  of 
McCrasly  v.  Hasslock,^  where,  after  stating  the  nature  and 
character  of  the  transaction  between  the  parties,  the  case 
of  Bank  v.  Ebbert  is  referred  to  as  an  authority  conclusive 
to  stamp  the  transaction  as  a  fraud. 

In  the  recent  case  of  Nailer  v.  Young, ^  the  same  author- 
ity is  cited  as  controlling  the  case  then  before  the  court, 
where  the  vendor  of  a  stock  of  goods  attempted  to  reclaim 
them  by  virtue  of  a  recital  in  the  note  given  for  the  pur- 
chase price,  as  follows :  "A  lien  is  retained  on  said  stock  or 
stocks  of  goods  at  Crowder's  mill  until  the  purchase  money 
is  paid."  The  proof  showed  that  the  goods  were  sold  for 
the  express  purpose  of  being  disposed  of  at  retail  by  the 
vendee,  in  his  own  business,  and  for  his  own  benefit,  and 
were  in  part  so  disposed  of. 

§  01.  Fraudulent  tendency  a  vicious  feature  in  such 
transactions.  —  The  opinion  in  the  last  named  case  was  de- 
livered by  Cooper,  J.,  who  had,  as  Chancellor,  previously 
decided  the  case  of  Phelps  v.  Murray,^  in  which  the  princi- 
ples applicable  to  this  class  of  cases  had  been  examined 
with  care  and  minuteness.  A  stock  of  goods  had  in  this 
case  been  covered  by  a  trust  deed,  which  on  its  face  was  de- 
signed to  include  accretions  of  after-acquired  goods,  and 
allowed  sales,  the  profits  thereof  to  be  applied  to  the  pay- 
ment of  the  secured  debt.  It  was  claimed  that  this  convey- 
ance should  be  decreed  valid  by  a  chancery  court,  because 
enforceable  in  equity.  The  learned  judge,  however,  dis- 
tinojuished  the  case  from  those  where  a  contract  to  morto-aore 
after-acquired  property  is  enforceable  in  equity,  by  the  cir- 

1  4  Baxter,  1.  «  7  Lea,  735  (1881).  »  2  Tenn.  Ch.  746. 

94 


DOCTIIINE    OF    THE    AMEUICAN    MAJORITY.  §     ()2 

cumstance  that  it  was  an  attempt  to  create  a  lien  on  chat- 
tels, whose  only  protitable  use  is  as  articles  of  commerce, 
and  as  to  which  an  unlimited  power  of  disposition  was  re- 
served. He  further  explained  that  such  conveyances  are 
not  deemed  fraudulent  by  reason  of  any  jDresumpiion  of 
fraud  which  is  in  conflict  with  the  general  rule  that  the  in- 
tent to  defraud  is  a  fact  to  be  proven  in  every  case;  but 
that  they  are  condemned  because  they  are  against  public 
policy,  in  that  they  throw  open  "  too  wide  a  door  for  possi- 
ble fraud;"  they  are  contracts  "  invalid  at  law,  and  not 
enforceable  in  equity." 

A  dictum  in  the  recent  case  of  McCombs  v.  Guild, ^  the 
opinion  being  by  the  same  judge,  shows  that  the  two  cases 
last  named,  and  that  of  Bank  v.  Ebbert,  are  considered  as 
together  evidencing  the  rule  on  this  subject  in  Tennessee. 
It  was  there  stated  further  that,  in  analogy  to  this  doctrine, 
the  court  would  probably  treat  a  sale  of  chattels,  reserving 
title  to  the  vendor,  but  allowing  the  vendee  to  sell  them  as 
as  his  own,  as  "  tending  to  hinder  and  delay  creditors,"  or 
as  "contrary  to  public  policy  and  void,"  in  accordance 
with  the  New  York  cases  above  cited,-  and  the  Connecticut 
case  of  Lewds  v.  McCabe.^ 

Mississippi. 

§  62.  The  doctrine  advisedly  adopted  in  Mississippi.  — 

In  Harman  v.  Hoskins  *  the  Supreme  Court  of  Mississippi 
follows  the  ruling  in  Robinson  v.  Elliott  and  Collins  v. 
Myers,  and  holds  that  a  conveyance  in  trust  of  a  stock  of 
goods  in  trade,  with  a  provision  allowing  the  grantor  to 
carry  on  his  usual  business,  is  fraudulent  and  void.  Like 
some  other  courts,  this  court  infers  from  the  vicious  char- 
acter of  such  an  instrument  that  the  parties  thereto  intend 

1  9  Lea,  81.  ^  See  joos;!,  sect.  79. 

2  Ante,  sect.  42.  *  56  Miss.  142  (1878). 

95- 


§  02    FRAUDULENT  MORTGAGES  OF  MERCHANDISE. 

to  commit  the  fraud  that  results.  It  is  said  in  this  case:  * 
"The  effect  and  operation  of  a  written  instrument  is  a 
question  of  hiw,  and  where  the  natural  and  necessary  con- 
sequence of  its  provisions  is  to  delay,  hinder,  or  defraud 
creditors,  the  court  will  so  declare.  The  intent  is  gathered 
from  the  instrument,  and  no  external  aid  is  necessary  to  de- 
velop it.  A  party  will  be  held  as  '  intending  '  the  natural 
and  inevitable  effects  of  his  acts.  If  his  deed  necessarily 
operates  to  interpose  unreasonable  hindrance  and  delay  to 
creditors,  or  to  defeat  them  altogether,  the  intent  will  be  a 
conclusion  of  law."  Though  this  view  of  these  cases  seems 
based  on  the  idea  that  a  fraudulent  intent  must  always  ap- 
pear, it  does  not  in  substance  differ  from  the  view  that  the 
transaction  is  actually  fraudulent,  irrespective  of  intent. 
The  intent  here  imputed  to  the  grantor  is  found  alone  in  the 
instrument  and  in  the  circumstances  of  the  case,  not  in  his 
motive ;  and  the  view  of  the  question  above  presented  is 
equivalent  to  saying  that  the  transaction  is  inherently  fraud- 
ulent. In  the  same  case,  it  was  further  said  :  "  Though  the 
act,  in  a  moral  view,  was  entirely  fair,  suggested  by  affec- 
tion, and  though  the  real  purpose  was  to  pay  all  debts,  yet 
if  the  conveyance  be  of  the  character  and  operation  just 
described,  it  will  not  stand  against  creditors."  That  char- 
acter and  operation  were  furthermore  portrayed  in  these 
succinct  terms  :  ^  "  If  the  deed  should  be  valid,  the  effect 
would  be  that  White  held  a  shifting  lien,  which  took  hold 
of  the  goods  on  hand,  and  as  these  were  sold  off,  it  separ- 
ated itself  from  the  effects  in  the  hands  of  Harman's  cus- 
tomers, but  at  once  fastened  upon  the  note  or  book-account 
owing  by  the  buyers  ;  and  when  the  merchandise  was  brought 
into  the  store,  it  at  once  became  impressed  with  the  lien; 
from  the  merchandise  it  passed  to  the  debts  of  the  custom- 
ers who  bought  it.     And  thus,  the  plan  was  that  the  busi- 

1  p.  145.  '  p.  147. 

96 


DOCTRINE    OF    THE    AMERICAN    3IAJORITY.  §    63 

ness  should  revolve  in  this  cycle,  the  sul)jeots  of  the  lien 
undergoing  mutations  from  goods  to  debts,  for  the  space  of 
three  years.  In  the  meantime,  the  other  creditors  must 
stand  the  varying  fortunes  of  the  venture,  without  power 
or  right  to  move  against  the  goods  or  the  credits  of  Har- 
mau,  for  AYhitc's  security  attaches  to  both,  as  they  may  be 
severally  acquired."  It  was  observed  that  not  only  as  to 
the  cash  receipts  from  the  business,  which  were  subject  to 
the  "  control  and  disposition  "  of  the  grantor,  but  in  other 
respects  also,  the  arrangement  would  operate  greatly  to  his 
benefit.  For  these  reasons  the  trust  deed  was  declared 
fraudulent  as  to  the  creditor  who  attacked  it. 

§  63.    Earlier    recognitions    of    the    propriety    of    the 

rule.  —  This  Avas  the  first  case  in  which  the  question  Avas 
fully  considered  by  the  Supreme  Court  of  Mississippi. 
Earlier  cases  had,  however,  led  the  way  to  this  decision. 
In  Farmer's  Bank  v.  Douglas^  the  question  was  presented 
of  a  reservation,  under  a  mortgage  conveying  farming 
property,  implements,  crops,  and  furniture,  of  the  right  to 
lise  property  consumable  in  the  use,  such  as  corn,  fodder, 
and  potatoes.  The  same  principle  was  applied  here  as  in 
Harman  v.  Hoskins,  the  court  saying:  -  "  The  mortgaging 
of  property,  the  use  of  which  involves  its  consumption,  is 
an  evidence  of  fraud,  not  indeed  conclusive,  but  of  much 
weight.  Unless  it  be  explained  satisfactorily,  it  must  cause 
the  condemnation  of  the  instrument ;  and  it  imposes  the 
burthen  of  proof  upon  those  claiming  under  such  instrument ; 
and  when  the  ri«:;ht  to  use  it  is  also  reserved  in  the  morto;age 
itself,  it  is  fraudulent  upon  its  face.  In  this  case,  one  of  the 
debts  secured  by  the  mortgage  did  not  become  due  until 
twenty-eight  months  after  its  execution,  and  the  other  until 
more  than  four  years.  The  corn,  the  fodder,  the  potatoes, 
and  perhaps  other  articles,  would  be  destroyed  in  much  less 

I  11  Smed.  &  M.  469  (1848).  ^  p.  540. 

7  97 


§    G3         FRAUDULENT   MORTGAGES    OF   MEIICIIAXDISE. 

time.  It  is  thus  veiy  manifest  that  the  object  was  not  to 
apply  these  things  to  the  payment  of  the  debts,  but  to  se- 
cure the  debtor  in  their  possession  and  enjoyment.  The 
reservation  in  the  conveyance,  of  so  much  of  these  articles 
as  was  necessary  for  the  support  of  the  propert}^  puts  an 
impress  of  fraud  upon  it,  from  which  there  is  no  escape. 
It  was  a  direct  benefit  secured  to  the  debtor  at  the  expense 
of  his  creditors,  which  the  law  does  not  sanction." 

In  Summers  v.  lioos  ^  a  case  was  presented  of  a  trust 
deed  conveying,  among  other  property,  a  stock  of  goods  in 
trade,  to  secure  a  debt  due  in  ninety  days.  The  deed  was 
sustained  as  valid,  and  the  case  was  distinguished  from  Col- 
lins V.  Myers  and  similar  cases,  by  the  circumstances  that 
here  was  no  power  of  sale  contained  in  the  deed,  and  that 
the  trustee  had  taken  possession  under  the  deed  before  ad- 
verse creditors  had  asserted  their  claims.  It  appeared  in 
the  deed  that  the  grantor  was  to  retain  possession  until  de- 
fault, and  if  he  failed  to  pay  at  maturity,  he  was  then  *'  to 
deliver  possession  of  the  real  estate  and  of  so  much  of  said 
personal  property  as  may  then  be  on  hand."  This  was  not 
construed  as  being  equivalent  to  a  power  of  sale.  Evidence 
that  the  beneficiaries  had  permitted  the  grantor  to  make 
sales  of  the  goods  was  held  to  be  only  a  circumstance  to  go 
to  the  jury.  The  case,  it  should  be  observed,  was  a  suit  at 
law  to  try  the  right  of  property  in  the  goods.  But  in  the 
case  of  Hilliard  v.  Cagle,^  the  same  conveyance  came  again 
before  the  court  for  examination,  in  a  chancery  suit  brought 
by  creditors  of  the  grantor  to  set  aside  the  conveyance ; 
and  on  the  whole  case  as  then  presented,  the  deed  was  de- 
clared fraudulent  and  void  as  to  other  creditors.  In  part, 
the  conduct  of  one  of  the  beneficiaries  under  that  deed,  in 
inducing  others  to  sell  goods  to  the  grantor  on  credit,  in- 
fluenced the  court  to  its  conclusions.     But  in  the  careful 

1  42  Miss.  749;  2  Am.  Kep.  G53  (1869).  *  45  Miss.  309  (1872). 

98 


DOCTRINE    OF    THE    AMERICAN    MAJORITY.  §    04 

review  by  the  court  of  all  the  facts  of  the  case,  it  appears 
that  the  circumstance  of  the  grantor's  continuing  to  trade 
with  the  goods  made  a  decided  impression.  Among  other 
thinjrs,  it  was  said:  "The  arrano-ement  between  Baffsrett 
and  Summers  was  antao-onistic  to  the  reo-ular  and  usual 
course  of  business,  tended  to  break  down  commercial  con- 
fidence and  credit,  and  to  entail  losses  upon  those  who  trusted 
their  goods  and  property  to  the  retail  merchant."  The  in- 
tent of  the  parties  was  held  immaterial ;  the  court  did  not 
think  the  arrangement  was  made  "  with  a  fraudulent  scheme 
and  purpose,  to  defeat  existing  or  future  creditors  ;  "  but 
still  considered  "  the  whole  scheme  fraudulent  as  to  subse- 
quent creditors,  as  much  so  as  if  it  had  been  contrived  with 
that  motive  and  for  that  object."  The  decision  in  Sum- 
mers V.  Roos  was  interpreted  as  meaning  simply  that  the 
conveyance  was  not  void  upon  its  face. 

§64.  The  doctrine  established  in  Mississippi.  —  In   the 

recent  case  of  Joseph  v.  Levi,^  the  doctrine  of  Harman  v. 
Hoskins  is  reaffirmed,  briefly  and  unqualifiedly.  The 
grounds  for  this  opinion  as  to  such  conveyances  are  stated 
to  be,  "  because  of  their  susceptibility  of  abuse,  by  reason 
of  the  ease  with  which  they  may  be  employed  for  wrong 
purposes,  to  the  injury  of  creditors."  And  this  is  stated 
as  the  settled  doctrine  in  Mississippi,  in  Baldwin  v.  Flash,^ 
where  it  was  held  that  the  claim  of  the  beneficiary  to  the 
goods  conveyed  by  a  similar  instrument  might  be  sustained, 
on  the  ground  that  prior  to  the  intervention  of  adverse 
creditors,  and  by  a  new,  independent  act,  he  had  taken,  and 
the  grantor  had  surrendered  to  him  the  goods  on  hand ;  and  as 
to  this,  the  case  was  to  be  submitted  to  a  jury  under  proper 
instructions  as  to  the  good  faith  and  honest  intent  of  such 
surrender.     This,   if    free  from  fraudulent  intent,  would 

1  58  Mis3.  843  (1881).  «  58  Miss.  593  ;  59  Id.  61. 

99 


§    0()  FRAUDULENT    MORTGAGES    OF    3IEKCHANDISE. 

present  only  the  ordinary  occurrence  of  a  preference  of  one 
creditor  by  an  embarrassed  debtor. 

Colorado. 

§  05.  The  doctrine  well  settled  in  Colorado.  —  In  this 
State,  in  the  case  of  Bank  v.  Goodrich,^  a  mortgage  on  a 
stock  of  goods  in  trade,  which  allowed  the  mortgager  to 
"  retain  possession  of  the  mortgaged  property,  and  use  and 
enjoy  the  same,  until  default  made,"  was  held  to  be  fraud- 
ulent and  void ;  the  rule  being  regarded  by  the  court  as 
"  too  well  settled  to  require  argument,"  though  the  Illinois 
and  some  other  cases  were  referred  to  as  authorities.  The 
evidence  furnished  by  the  mortgage  itself  was  supplemented 
by  proof  that  the  mortgagers  not  only  continued  in  posses- 
sion of  the  goods,  but  carried  on  their  business  in  its  or- 
dinary course,  manufacturing  and  selling  goods  as  usual,  to 
the  knowledge  of  the  mortgagee. 

Oregon. 

§  6Q.  Oregon  adopts  the  doctrine;  registration  of  in- 
strument immaterial.  —  In  Oregon,  the  earliest  case  was 
Orton  V.  Orton,-  which  presented  the  question  fairly,  the 
property  mortgaged  being  a  stock  of  goods,  the  mortgager 
of  which  retained  possession  and  the  power  of  sale,  and 
applied  the  proceeds  of  sales  to  his  own  use  with  the  per- 
mission of  the  mortgagee  ;  but  the  mortgage  was  duly  tiled 
for  record,  and  it  was  claimed  that  the  statutes,  provid- 
ing for  the  registration  of  such  mortgages,  removed  all 
presumptions  of  fraud  which  could  arise  in  any  such  case. 
It  was,  however,  held  that  this  statute  did  not  in  any  man- 
ner apply  to  the  case,  but  the  question  still  remained  to  be 
considered,  as  to  the  legal  effect  of  such  an  agreement,  in 
view  of  the  rio-hts  of  the  mortofaijer's  creditors.     The  mort- 

1  3  Colo.  139  (1876).  2  7  Oregon,  478  (1879). 

100 


DOCTRINE    OF   THE    AMERICAN  MAJORITY.  §    67 

gage  was  held  fraudulent  and  void,  in  accordance  with  the 
decisions  in  Robinson  v.  Elliott^  and  Collins  v.  Myers, ^ 
which  were  recognized  as  representing  "  the  weight  of 
authority  as  well  as  reason." 

The  question  again  arose  in  Jacobs  v.  Ervin,^  in  which 
case  the  court  approved  and  followed  Orton  v.  Orton,  say- 
ing of  the  doctrine  of  tiiat  case:  "The  reasons  upon 
which  it  is  based  seem  to  us  to  be  sound,  and  the  author- 
ities cited  in  its  support  are  both  able  and  well  consid- 
ered. We  have  no  hesitancy  in  affirming  it  here  as  a 
sound  and  authoritative  exposition  of  the  law  upon  the 
subject  in  this  State."  In  the  later  case  of  Bremer  v. 
Fleckenstein,*  this  was  declared  to  be  "  settled  doctrine  " 
in  Oregon.  In  both  these  cases,  the  power  of  sale  was 
proven  by  a  verbal  agreement,  additional  to  the  mortgage, 
which,  it  was  said,  "  as  cifectually  invalidates  the  mortg- 
age as  an  agreement  incorporated  into  the  mortgage 
itself." 

West  Virginia. 

§  67.  The  reserved  power  of  sale  proven  by  implication 
in  West  Virginia.  —  The  few  cases  of  this  class  presented 
in  West  Virginia  have  all  been  decided  in  conformity  to 
this  view.  Kuhn  v.  Mack  ^  was  a  case  of  a  trust  deed  con- 
veying, among  other  property,  a  stock  of  goods,  with  stip- 
ulations referring  to  sales  made  by  the  grantor  "  in  the 
regular  course  of  his  business."  The  Court  of  Appeals  held 
this  reservation  of  a  power  of  sale  "  inconsistent  with  the 
object  of  the  trust,  and  adequate  to  the  defeat  thereof  ; " 
citino;  Lanoj  v.  Lee®  and  other  Virginia  cases.  The  same 
principle  was  applied  in  Garden  v.  Bod  wing, ^  where  a  sim- 
ilar trust  deed,  though  it  contained  no  express  reference  to 
a  power  of    sale  or  disposition,  recited  that   the   grantor 

1  22  Wall.  513.  .3  9  Ore.  52.  «  3  Rand.  410. 

»  16  Ohio,  647.  *  9  Id.  266.  '  9  W.  Va.  121  (1876). 

5  4  W.  Va.  186  (1870). 

101 


§  G8    FRAUDULENT  MORTGAGES  OF  MERCHANDISE. 

*' agrees  and  obligates  himself  to  keep  always  on  hand  a 
stock  of  goods  equal  in  quality,  description  and  value,  to 
the  personal  property  herein  above  mentioned,  until  the 
debt  which  this  deed  is  drawn  to  secure,  is  paid  in  full." 
Deducing  from  this  clause  the  inference  that  the  grantor 
thereby  retained  not  only  possession,  but  an  absolute  power 
of  sale,  the  court  held  the  deed  fraudulent,  though  there 
was  no  other  proof  of  fraudulent  intent.  And  in  Gardner 
V.  Johnston,^  where  a  miller  had  conveyed  all  his  milling 
stock  and  property  to  secure  debts  due  in  about  a  year  and 
five  months,  the  circumstance  that  a  large  portion  of  the  prop- 
erty conveyed  was  grain,  purchased  for  milling,  was  taken 
as  conclusive  of  an  understanding  that  the  grantor  should 
use  and  dispose  of  the  property ;  and  the  case  was  held  to 
call  for  an  application  of  the  rule  in  Lang  v.  Lee  and  other 
similar  cases,  to  wit:  that  where  there  are  provisions  in  the 
deed  which  will  enable  the  grantor  to  defeat  its  expressed 
object  as  a  security,  the  deed  is  fraudulent  ^er  se.  Neces- 
sary implication  was  held  as  effective,  for  such  a  construc- 
tion, as  an  express  provision  \n  the  deed. 

The  Federal  Courts. 

§  G8.  The  doctrine  enforced  in  the  Circuit  and  Dis- 
trict Courts.  —  There  are  numerous  cases  in  the  United 
States  Circuit  and  District  Courts,  many  of  which  arose  in 
bankruptcy,  in  which  mortgages  of  this  class  have  been 
held  fraudulent  and  void,  not  with  reference  to  the  provi- 
sions of  the  bankrupt  law,  but  independently  of  that  or 
other  statutes,  and  under  the  general  rules  of  the  common 
law.  Decisions  to  this  effect  have  been  given  in  such  cases, 
in  the  federal  courts  of  nine  different  States ;  and  several 
of  these  were  rendered  prior  to  Robinson  v.  Elliott.  In 
Smith  V.  McLean,-  Ee  Forbes,^  and  Re  Bloom,*  the  power 

'  9  W.  Va.  403.  3  5  Biss.  510  (Ills.) 

2  10  N.  B.  R.  260  (Miss.).  *  17  N.  B.  R.  425  (New  Jersey). 

102 


DOCTRINE    OF    THE    AMERICAN    MAJORITY.  §    68 

of  sale  and  disposition  appeared  upon  the  face  of  the  instru- 
ment. In  McLean  v.  Bank,^  Bowen  v.  Clark,^Iie  Kahley,^ 
Re  Cantrell,*  Re  Moi-nll,^  Re  Barrows,^  Smith  v.  Ely/ 
Catlin  V.  Currier,^  and  Re  Kirkbride,^  it  was  shown  by  evi- 
dence aliunde.  In  Crooks  v.  Stuart/^  there  were  two 
mortgages,  one  of  which  exhibited  such  a  power  upon  its 
face,  it  being  shown  as  to  the  other  by  evidence  aliunde. 
It  appeared  to  the  court  by  clear  implication  from  the  stip- 
ulations of  the  instrument,  in  Re  Manly;  ^^  and,  inferen- 
tially,  in  the  same  manner  also  in  Re  Perrin.^^  Two  late 
cases  in  the  Supreme  Court  for  the  District  of  Columbia, 
Smith  V.  Kenney^^  and  Fox  v.  Davidson,^*  dispose  of  the 
general  question  in  like  manner;  though  in  the  first  named 
case,  the  point  was  not  under  decision,  the  case  turning  on 
another  question.  In  Fox  v.  Davidson,  the  power  of  sale 
appeared  by  clear  implication. 

In  Re  Kirkbride,^^  a  case  arising  in  Missouri,  Dillon,  C.  J., 
respected  and  applied  the  rule  adopted  in  that  State  as  to 
such  conveyances,  and  held  the  mortgage  in  question  fraud- 
ulent and  void  as  to  the  goods  in  trade,  though  valid  as  to 
the  fixtures,  which  were  not  included  in  the  reservation  of  a 
power  of  sale.  In  this  case  the  reservation  appeared,  not 
on  the  face  of  the  instrument,  but  from  evidence  aliunde. 

1  3  McLean,  623  (Ohio,  1845). 

2  1  Biss.  128;  5  Am.  L.  Reg.  203  (Wis.  1856). 
s  2  Biss.  383 ;  4  N.  B.  R.  124,  378  (Wis.). 

*  6  Ben.  482  (New  York). 

5  2  Saw.  356 ;  8  N.  B.  R.  117  (Nevada). 

6  7  Biss.  626 ;  5  C.  L.  J.  241  (Indiana). 
'  10  N.  B.  R.  553  (New  York). 

^  1  Sawyer,  7  (Oregon). 

9  5  Dillon,  116  (Mo.) 

"  2  McCrary,  13;  7  Fed.  Rep.  800  (Iowa,  1881). 
"  2  Bond,  261 ;  3  N.  B.  R.  75,  291  (Ohio). 
1^  7  N.  B.  R.  283  (New  York). 
'3  1  Mackey,  12;  9  Wash.  Law  Kep.  69. 
1*  1  Id.  102 ;  9  Id.  263. 
15  5  Dillon,  116  (1878). 

103 


§  G9    FKAUDULENT  MORTGAGES  OF  MERCHANDISE. 

Dillon,  C.  J.,  stated  the  Missouri  rule  as  follows  :  "A  con- 
veyance of  personal  property  to  secure  creditors,  when  the 
grantor,  by  the  understanding  of  the  parties,  expressed  or 
implied,  is  to  remain  in  possession  of  the  property,  with  a 
power  of  sale,  is  void  upon  a  principle  of  public  polic}'  em- 
bodied in  the  State,  irrespective  of  any  question  of  actual 
and  intended  fraud." 

§   09.  The   fraud    illustrated    in   the    opinions    of   the 

courts.  —  In  Re  Kahley,^  the  court  said:  "A  mortgage 
accompanied  by  such  an  agreement  or  consent  is  no  protec- 
tion to  the  mortgagee.  Such  an  arrangement  defeats  its 
essential  nature  and  quality  as  a  mortgage,  so  that  it  can- 
not in  a  legal  sense  be  called  a  security.  It  is  nothing 
more  than  the  expression  of  a  confidence  by  the  mortgagee 
in  the  mortgager."  In  Catlin  v.  Currier,^  it  was  said: 
"The  law  allows  the  property  pledged  to  remain  in  the 
possession  of  the  mortgager,  if  the  mortgage  is  put  on  record 
as  notice  to  the  world.  But  if  the  mortgage  be  also  coupled 
with  a  condition  or  agreement  that  the  mortgager  may  treat 
the  goods  as  if  he  w^ere  the  owner  of  them,  may  sell  them  at 
his  option  and  receive  the  proceeds  to  his  own  use,  such 
condition  or  ao;reement  avoids  the  mortofage.  The  two  can- 
not  stand  together.  Such  use  of  the  mortgaged  property 
by  the  mortgager  is  utterly  inconsistent  with  the  idea  of 
giving  a  pledge  or  security  to  the  mortgagee.  In  legal 
effect  it  is  a  sham;  anullit}';  a  mere  shadow  of  a  mort- 
gage, only  calculated  to  ward  off  other  creditors;  a  conve}'- 
ance  in  trust  for  the  benefit  of  the  person  making  it,  and 
therefore  void  as  against  creditors."  "The  law  assumes 
absolutely,  and,  be3^ond  doubt  correctly,  that  in  no  circum- 
stances can  such  a  transaction  be  upheld  in  justice  to  credi- 
tors. That  is  this  case,  and  whatever  may  have  been  the 
intention  of  the  parties,  the  law,  for  the  protection  of  the  gen- 

1  2  Biss.  at  p.  387  (1870).  "  1  Saw.  12-14  (1870). 

104 


DOCTRINE    OF    THE    AMERICAN    MAJORITY.  §    70 

eral  creditors  of  the  debtor,  declares  the  so-called  mortgage 
void,  because  made  in  trust  for  Daly."  In  Re  Burrows,^  it 
was  said:  *'  Such  an  agreement  necessarily  hinders  and  de- 
lays other  creditors;  "  and  in  Re  Bloom, ^  the  court  said  : 
<'A  mortgage  embraces  a  single  idea,  to  wit:  the  pledge  of 
property  as  security  for  the  payment  of  a  debt.  If  it  con- 
tain other  stipulations  and  provisions,  which,  in  their  neces- 
sary effect,  accomplish  other  results,  and  these  other  results 
are  unlawful,  the  whole  instrument  is  void.  The  parties 
assert  that  the  end  and  purpose  of  the  mortgage  are  to 
enable  the  mortorao-er  to  sell  for  his  own  benefit  the  oroods 
and  chattels  specifically  enumerated,  and  to  make  it  a  lien 
upon  all  new  goods  brought  into  the  store.  In  other 
words,  it  is  a  device,  whereby  the  mortgager  can  carry  on 
his  ordinary  business,  with  all  his  property,  present  and 
future,  fully  covered  from  his  other  creditors.  An  instru- 
ment operating  in  this  manner  necessarily  hinders,  delays 
and  defrauds  creditors." 

§  70.  Other  cases  in  the  lower  courts  ;  the  doctrine 
recognized.  —  In  Johnson  v.  Patterson,^  Woods,  J.,  while 
deciding  the  case  adversely,  under  the  provisions  of  the 
Georgia  statute,  gave  unqualified  recognition  to  the  doctrine 
of  the  common  law,  when  unaffected  by  legislation,  in  these 
words  :  *<  To  one  unacquainted  with  the  statute  law  of  this 
State  *  this  case  would  present  no  difficulty  whatever.  The 
general  rule  is,  that  a  chattel  mortgage,  with  possession  left 
in  the  mortgager,  and  power  of  sale,  is  fraudulent  and  void." 
Hawkins  v.  Bank ^  and  Overman  v.  Quick  ^ in  like  manner 
recognize  the  doctrine  as  well  established ;   but  in  each  of 

1  7  Biss.  526. 

2  17  N.  B.  K.  425  (1878). 

3  2  Woods,  443,  (Georgia,  1875). 

*  See  reference  to  this  statute,  post,  sect.  111. 
5  1  Dillon,  462  (Minn.). 
«  8  Biss.  134, 

105 


§    70         FRAUDULENT    .MORTGAGES    OF    MERCHANDISE . 

these  cases,  the  mortgagers  being  allowed  to  make  sales  only 
as  airents  for  the  mortijafiee  who  Avas  to  control  the  pro- 
ceeds,  the  transaction  was  held  valid.  In  Harvey  v.  Crane  ^ 
and  Ke  Eldridge,^  the  question,  though  possibly  involved, 
was  not  raised  or  considered.  The  former  of  these  cases 
was  considered  only  as  to  the  statutory  validity  of  chattel 
mortgages,  and  the  latter  only  as  to  the  matter  of  after 
acquired  property.  In  Bank  v.  Small,^  the  power  of  sale 
appeared  by  implication,  but  the  question  was  not  consid- 
ered ;  and  the  main  question  discussed  was  that  of  a  delay 
in  rccordino;  the  mortirafre,  which  w'as  considered  and  de- 
cided  with  reference  to  the  intent  of  the  parties,  the  court 
referring  afterward  to  Mitchell  v.  Winslow  *  as  an  authority. 
Field  V.  Baker  ^  in  like  manner  ignores  the  question  which 
might  have  been  raised  upon  the  record,  and  the  case  is 
considered  solely  with  reference  to  other  Questions  as  to  the 
validitv  of  chattel  mortgages. 

In  Johnson  v.  Patterson,^  it  will  be  observed  that  the  rule 
under  the  Georgia  statute,  which  is  recognized  and  applied 
in  the  decision,  is  taken  as  a  rule  of  property,  which  should 
be  locally  binding  upon  the  federal  courts.  The  same  idea 
evidently  controlled  the  decision  in  Re  Kirkbride.^  Pe7' 
contra,  m  Crooks  v.  Stuart,^  the  doctrine  of  Robinson  v. 
Elliott  was  held  conclusive  upon  the  court,  for  the  reason 
that  no  Iowa  statute  made  any  contrary  provision ;  and  the 
well  settled  doctrine  of  the  Iowa  courts  on  this  subject  was 
disregarded,  McCrary,  C.  J.,  saying:  "This  is  a  doctrine 
of  general  jurisprudence,  not  depending  for  its  support 
upon  any  provision  of  State  law;  and  we  are,  therefore, 
bound  by  the  decision  of  the  Supreme  Court  of  the  United 
States." 

1  2  Biss.  496  ;  5  N.  B.  R.  218  (111.).        ^  12  Blfltch.  438. 

2  2  Biss.  862  (Wis.).  «  2  Woods,  443. 

3  7  Fed.  Rep.  837  (Me.  1881).  '  5  Dillon,  116. 

*  2  Story,  630.  «  7  Fed.  Rep.  800 ;  2  McCrary,  13. 

106 


DOCTRINE    OF    THE    AMERICAN    MAJORITY.  §    71 

§  71.  An    earlier    decision    l>y  the   Supreme  Court. — 

This  principle  of  law  was  not  wholly  devoid  of  support  in 
the  expressed  views  of  the  Supreme  Court,  even   before 
Robinson  v.  Elliott,  though  it  was  in  that  case  considered 
and  discussed  as  a  new  proposition  in  that  forum.     The 
question   arose   incidentally    in  Bank  of    Leavenworth  v. 
Hunt.^     In  that  case  it  appeared  by  evidence  outside  the 
morto-ao-e  that  the  morto-aijers  of  a  stock  of  goods  in  trade 
remained  in  possession  and  continued  to  sell  the  goods,  with 
the  assent  of  the  mortgagee,  until  a  certain  time,  when  the 
balance  remaining  was  transferred  to  the  mortgagee  under 
the    mortgage.     The    question   at  issue  was,  whether  this 
transfer,  being  made  in  view  of  and  just  prior  to  the  bank- 
ruptcy of  the  mortgager,  was  valid  and  effectual  under  the 
bankrupt  law.     The  Supreme  Court  declined  to  assume  it 
to  be  so  in  the  face  of  the  testimony,  which  showed  it  to 
be  invalid  in  several  respects  ;  one  of  which  was  that,  if 
the  facts  had  been  found  by  the  jury  which  the  testimony 
tended  to  establish,  as  to  the  power  of  sale,  the  mortgage 
would  have  been  fraudulent  and  void  as  against  creditors, 
under  the  common-law  rule  announced  in  Wood  v.  Lowry.^ 
The  recent  case  of  Wood  v.    Weimar,^  which  arose  in 
Michigan,  may  be  here  noticed,  though  merely  because  it 
exhibits  an  entire  disregard  of  the  question.     It  presented 
a  mortgage  on  a  stock  of  goods,  under  which  the  mortgager 
was  suffered  to  continue  business  and  to  sell  goods  as  usual, 
and  creditors  attached  the  remaining  goods  before  the  ma- 
turity of  the  preferred  debt,  complaining  as  to  the  state- 
ment made  of  the  amount  thereof.     The  case  was  heard  in 
the  Supreme  Court  on  the  errors  assigned,  and  neither  by 
the  counsel  or  the  court  was  the  question  of  the  reserved 
power  of  sale  presented,  discussed,  or  considered.     Appar- 
ently this  question  was  treated  by  counsel  as  one  not  fairly 
arising  in  a  Michigan  case.* 

1  n  Wall.  391  (1870).  ^  17  Wend.  492.  ^  104  U.  S.  786. 

*  See  the  Michigan  law  on  this  subject  stated,  post,  sects.  88,  89. 

107 


§  72    FRAUDULENT  MORTGAGES  OF  MERCHANDISE. 

§  72.  Antagonistic  cases  in  the  United  States  courts.  — 

In  addition  to  Brett  v.  Carter,^  there  are  in  the  reported 
decisions  of  the  United  States  Circuit  Courts,  two  cases 
which  hold  the  same  view  of  the  law,  and  another  in  which 
that  view  is  very  strongly  favored  although  not  expressly 
adopted.  The  case  last  referred  to  is  Miller  v.  Jones, ^  in 
which  Associate  Justice  Strong  heard  on  appeal  a  contro- 
versy involving  a  mortgage  on  a  stock  of  goods.  The  only 
point  decided,  with  reference  to  the  question  of  a  power  of 
sale,  is  one  of  practice.  The  trial  court  had  thought  the 
implication  of  a  power  of  sale  so  strong  upon  the  face  of 
the  morto:ao;e,  that  the  case  would  fall  within  Robinson  v. 
Elliott,  and  he  accordingly  directed  a  verdict  adverse  to  the 
conveyance.  This  was,  on  the  appeal,  held  erroneous. 
The  case  was  distinguished  from  Robinson  v.  Elliott,  by 
the  circumstance  that  no  power  of  sale  was  given  in  the  in- 
strument, but  that  its  recitals  expressed  by  implication  a 
denial  of  any  such  power.  Though  the  proof  showed 
that  such  power  had  been  exercised,  it  was  never- 
theless erroneous  to  direct  a  verdict.  The  existence  or 
non-existence  of  an  ao-reement  or  understanding  to  allow 
sales  is  a  fact  to  be  found  by  the  jury,  under  proper  in- 
structions. In  reversing  the  decision  of  the  District  Court 
on  this  ground,  Mr.  Justice  Strong  referred  to  the  diver- 
sity of  opinion  on  the  main  question  concerning  the  reser- 
vation of  a  power  of  sale  under  such  mortgages ;  and  while 
he  did  not  in  any  manner  dissent  from  the  conclusions 
reached  in  Robinson  v.  Elliott,  he  spoke  with  apparent  ap- 
proval of  the  contrary  authorities  in  Maine,  Massachusetts, 
Iowa,  and  Michigan,  and  said:  "  It  has  in  many  cases  been 
decided  that  a  mortgage  of  chattels  which  permits  the  mort- 
gager to  remain  in  possession,  and  to  dispose  of  the  goods 
in  the  ordinary  course  of  his  business,  is  not  of   course 

1  2  Low.  458,  2  15  N.  B.  R.  150  (New  Jersey,  1876). 

108 


DOCTRINE    OF    THE    AMERICAN    MAJORITY.  §    I'd 

fraudulent  as  a  matter  of  law."  In  Re  Bloom, ^  Nixon,  J., 
distinguished  this  case  materially  from  Robinson  v.  Elliott. 
Barron  v.  Morris^  was  an  appeal  from  the  District  Court 
in  Texas,  heard  by  Mr.  Justice  Bradley  in  the  Circuit 
Court,  involving  a  trust  deed  on  carriages  and  harness, 
which  were  used  partly  as  a  stock  in  trade.  The  case  had 
been  tried  by  the  district  judge  without  a  jury,  and  it  ap- 
peared in  evidence  that  sales  had  been  made  by  the  grantor 
in  the  conveyance  with  the  knowledge  and  assent  of  the 
beneficiary,  the  proceeds  being  sometimes,  but  not  always 
applied  to  the  secured  indebtedness.  The  report  of  the 
case  is  meager  and  unsatisfactory  upon  this  point,  and 
the  disposition  made  of  the  proceeds  of  sales  does  not  fully 
appear.  The  opinion  of  Mr.  Justice  Bradley  is  devoted 
mainly  to  questions  of  practice,  all  that  is  said  on  the  ques- 
tion of  the  trust  deed  and  the  power  of  sale  being  that  "  the 
fact  that  the  bankrupt  disposed  of  the  property  as  his  own 
did  not  vitiate  the  deed  as  to  the  other  creditors,  but  was  a 
matter  that  affected  no  one  but  Brush  (the  secured  cred- 
itor), and  that  the  latter  was  not  bound  to  apply  the  pro- 
ceeds of  the  sales  of  the  encumbered  property -to  the  secured 
debt." 

§  73.  Mitcliell  V.  Win  slow  examined.  —  The  great  name 
of  Mr.  Justice  Story  has  made  the  case  of  Mitchell  v.  Win- 
slow^  a  leading  and  influential  authority  in  support  of  the 
supposed  validity  of  this  class  of  conveyances.  It  will  be 
seen,  however,  upon  examination  of  this  case,  that  the  pre- 
cise question  was  not  carefully  considered  according  to  the 
habit  of  this  learned  judge.  The  transaction  presented  was 
a  mortgage  deed  upon  a  manufacturing  establishment,  cov- 
ering not  only  tools  and  machinery,  but  stock  in  trade  ;  the 
debt  secured  to  mature  in  four  years,  and  the  grantors  "  to 

1  17  N.  B.  K.  425.  ^  14  ]sr.  B.  K.  371  (1876). 

3  2  Story,  G30  (Maine,  1843). 

109 


§    73         FRAUOULENT    3IOUTGAGES    OF    MERCHANDISE. 

hold  and  enjoy  all  and  singular  the  premises  hereby  granted, 
and  to  secure  and  take  the  rents  and  profits  therefor,  to  and 
for  their  own  use  and  benefit."  The  grantors  continued 
their  business  in  the  usual  way  for  two  and  one-half  years, 
when  they  became  bankrupt;  and  the  suit  was  brought  by 
their  assignee  to  recover  property  remaining  on  hand  from 
the  mortgagee  who  had  taken  possession  of  it.  For  the  as- 
signee, it  was  argued  that  the  reserved  power  and  dominion 
over  the  mortgaged  property,  with  the  right  to  sell  for  their 
own  use,  reserved  by  the  mortgagers,  was  inconsistent  with 
the  nature  and  objects  of  such  a  mortgage,  and  made  the 
transaction  invalid,  as  against  the  policy  of  the  law.  The 
learned  judge  conceded  that  the  reserved  power  of  sale  was 
fairly  deducible  from  the  language  of  the  instrument,  but 
thought  this  not  inconsistent  with  the  validity  of  the  mort- 
gage. Said  he :  "  I  am  not  aware  of  any  policy  of  the  law,  or 
of  any  principle  of  law,  which  makes  any  conveyance  of  this 
sort  invalid  as  to  creditors,  if  they  have  full  notice,  or  may 
have  full  notice  of  it  by  the  exercise  of  reasonable  diligence." 
In  his  view,  the  material  questions  to  be  considered  were,  the 
registration  of  the  mortgage,  the  possession  retained  by  the 
mortgager,  and  the  mortgagee's  lien  on  the  newly  acquired 
or  manufactured  goods  by  substitution.  The  mere  reten- 
tion of  possession  by  the  mortgager  was  not  fraudulent  per 
se,  and  registration  operated  as  constructive  and  sufficient 
notice  to  creditors.  The  question  of  the  reserved  power  of 
sale  was  treated  as  a  question  of  the  efficacy  of  a  lien  by 
substitution.  As  authorities  in  support  of  the  validity 
of  such  conveyances,  the  cases  of  Abbott  v.  Goodwin  ^  and 
Macomber  v.  Parker^  were  cited.  Each  of  these  cases, 
however,  has  features  of  marked  distinction  from  Mitchell 
V.  Winslow.  In  Abbott  v.  Goodwin,  where  there  was  a 
conveyance  of  a  stock  of  goods,  the  sales  were  to  be  made 

1  20.Maine,  408  (1841).  ^  14  Pick.  497  (1833). 

110 


DOCTRINE    OF    THE    AMERICAN    MAJORITY.  §     74 

by  the  grantor  solely  as  agent  of  the  grantees,  who  secured 
to  themselves  the  control  of  the  entire  proceeds  of  sales  ; 
and  the  goods  in  dispute  had  been  purchased  with  those  pro- 
ceeds, "  through  his  agency,  under  their  authority  ;  "  so  the 
element  of  the  grantor's  control  of  the  sales,  or  of  the  pro- 
ceeds thereof,  for  his  own  use,  or  at  his  own  discretion,  did 
not  exist  in  the  case.  Macomber  v.  Parker  presented  a  case 
of  the  manufacture  of  bricks,  in  the  brick3'ard  of  H.  &  L., 
by  E.  as  their  agent  and  joint-contractor;  the  manufactured 
bricks  to  be  divided,  H.  &  L.  retaining  a  lien  onE.'s  share 
thereof  until  payment  of  their  advances.  This  arrangement 
being  attacked  by  a  creditor  of  E.  as  fraudulent,  was  sus- 
tained by  the  court  on  the  theory  of  "  an  agreement  for  the 
pledging  of  the  bricks  as  they  should  be  made."  No  element 
existed  in  the  case  of  a  discretionary  power  of  sale  by  E. 
He  had  been  allowed  to  sell  only  as  agent  for  H.  &  L. 
These  cases,  together  with  an  English  case  cited  by  jNIr. 
Justice  Story,  presented  only  this  question  of  equitable  lien 
by  substitution,  without  any  feature  of  a  reserved  power  of 
sale,  such  as  the  learned  court  recognized  in  Mitchell  v. 
Winslow.  While,  therefore,  the  decision  in  this  case^  like 
that  in  Barron  v.  Morris,  is  distinctly  in  favor  of  the 
validity  of  such  a  conveyance,  it  seems  to  have  been  given 
without  full  consideration  of  the  real  difficulties  inherent  in 
such  transactions,  and  in  deference  to  the  supposed  author- 
ity of  cases  which  are,  in  fact,  irrelevant. 

Indiana. 

§  74.  The  state  of  the  law  in  Indiana  prior  to  Robin- 
son v.  Elliott.  — It  is  fortunate,  in  some  respects,  that  when 
the  Supreme  Court  of  the  United  States  was  again  called 
on  to  examine  and  pass  upon  this  question  in  Robinson 
V.  Elliott,  the  case  before  it  was  one  originating  in  Indiana; 
for  in  that  State  the  law  upon  the  subject  of  fraudulent  in- 
tent was  in  so  peculiar  a  condition  as  to  necessitate  a  close 

111 


§  74    FRAUDULENT  MORTGAGES  OF  MERCHANDISE. 

analysis  of  the  precise  province  of  the  court  in  dealing  with 
the  subject.  Jordan  v.  Turner  ^  held  a  mortgage  of  cattle 
and  horses  fraudulent  where  the  grantor  had  retained  pos- 
session, and  traded  and  trafficked  with  the  stock,  much 
after  the  manner  of  Twyne's  Case.  The  possession  of  the 
grantor  was  here  held  to  be  conclusively  fraudulent  as  a 
matter  of  law.  But  in  the  case  of  Watson  v.  Williams,'^ 
which  presented  a  question  of  possession  merely,  and  where 
there  Avas  "  no  evidence  that  the  mortgager  used,  traded 
on,  or  treated  the  mortgaged  goods  as  his  own,"  the  rule 
was  deduced  from  all  the  English  and  American  decisions 
that  fraud,  in  all  cases  of  mere  possession,  was  a  question 
of  fact  for  the  jury.  The  same  rule  was  applied  in  the  suc- 
ceeding case  of  Hankins  v.  Ingols,^and  it  remains  the  doc- 
trine of  Indiana  on  the  question  of  possession  alone.  The 
distinguishing  feature  of  Jordan  v.  Turner  was  the  power  of 
sale.  In  that  case,  the  same  judge  who  soon  after  pronounced 
the  opinion  in  Watson  v.  Williams,  said  :  *'  The  mortgager 
not  only  kept  possession  of  the  goods,  but  he  also  used  and 
treated  them  as  his  own  ;  converted  them  to  his  own  use ; 
traded  and  trafficked  on  them  as  his  own ;  sold  them  as  his 
own,  and  converted  the  proceeds  to  his  own  use.  These 
proceedings  are  not  only  contrary  to  the  face  of  the  mort- 
gage, but  arc  inconsistent  with,  and  in  direct  opposition  to 
the  intention,  spirit  and  meaning  of  it,  and  render  it  wholly 
fraudulent  and  void  as  to  creditors." 

New  Albany  Ins.  Co.  v.  Wilcoxson*  had  gone  far  toward 
approving  the  doctrine  of  the  New  York,  Wisconsin,  Ohio, 
and  ^Minnesota  cases.  It  sustained  the  finding  of  the  lower 
court,  that  a  provision  in  a  mortgage  upon  a  stock  of  goods 
in  a  manufacturing  establishment,  allowing  the  grantor  to 
continue  his  business,  was  necessarily  fraudulent  and  void 
as  against  creditors,  and  cited  the  advanced  case  of  Free- 

1  3  Blackf.  309  (1833).  3  4  /^.  35, 

2  4  Id.  26 ;  28  Am.  Dec.  36.  *  21  Ind.  855  (1863). 
112 


DOCTRINE    OF    THE    AMERICAN    MAJORITY.  §    74 

man  v.  Kawson.^  This  was  done  rather  argumentatively 
than  decisively,  with  expressions  of  doubt  as  to  how  far  the 
principles  of  that  case  would  reach;  but  still  declining  to 
disturb  the  finding  made  by  the  lower  court  without  a  jury. 
But,  on  the  other  hand  was  the  similarly  indecisive  case  of 
Maple  V.  Burnside.^  The  Legislature  had  engrafted  upon 
the  statutes  of  Indiana  the  provision,  adopted  in  several 
other  States,  that  the  question  of  fraudulent  intent  should 
in  all  cases  be  deemed  a  question  of  fact.  The  jury  in 
Maple  V.  Burnside  had  been  told  that  if  the  mortgager  '*  re- 
mained in  possession  of  the  mortgaged  property,  using  and 
trading  with  it  as  the  owner,  it  is  a  fraud  and  you  must  find 
for  the  plaintiffs  ;  "  and  the  appellate  court  reversed  the 
judgment,  on  the  grounds,  first,  that  the  instruction  was  cal- 
culated to  confuse  the  jury,  and  second,  that  it  disregarded 
the  statute  as  to  fraudulent  intent.  Thus  stood  the  law  in 
Indiana  when  Robinson  v.  Elliott  arose  ;  and  counsel  in 
that  case,  seeking  to  uphold  the  mortgage,  cited  and  relied 
on  Maple  v.  Burnside.  It  was  thus  an  important  consider- 
ation before  the  Supreme  Court  of  the  United  States 
whether  all  questions  of  fraud  in  law  were  not  pretermitted 
by  the  statute,  so  far  at  least  as  concerned  Indiana  cases. 
It  was  urged  that  "  constructive  fraud  "  ceased  to  have  any 
existence  in  Indiana,  and  that  the  courts  had  no  riffht  to  en- 
tertain  or  express  any  opinion  whatever  upon  the  question 
of  the  fraudulent  character  of  a  conveyance  which  reserved 
upon  its  face  the  right  to  continue  selling  the  goods  in  trade 
as  theretofore.  But  the  Supreme  Court  held  that  the  statute 
in  question  could  have  no  reference  to  the  power  or  duty  of 
courts  to  pass  upon  questions  of  law.  The  Indiana  case 
was  cited  of  Jenners  v.  Doe,^  a  case  referring  to  lands, 
where  it  was  considered  that  the  statute  in  question  was 
merely  declaratory  of  the  law,  and  that  the  question  of 

»  5  Ohio  St.  1.  2  22  Ind.  139  (1864).  ^  9  i^d,  461. 

8  113  " 


§  75    FKAUDULENT  MORTGAGES  OF  MERCHANDISE. 

fraudulent  intent,  which  it  referred  to  the  jury,  was  only 
the  fact  of  such  intent  in  cases  hinging  upon  the  actual  in- 
tent of  the  parties.  It  was  well  said  in  that  case:  "  If  the 
court  determines  that  the  legal  effect  of  the  instrument  is  to 
delay  creditors,  the  instrument  is  rejected.  There  is  no 
occasion  to  go  into  the  question  of  intent,  for  that  could  not 
aid  a  void  instrument.  Intent  will  not  control  the  plain 
legal  effect  of  the  terms  of  an  instrument ;  and  if  that  effect 
would  be  to  delay  creditors,  any  intent  that  the  party  might 
have  had  to  the  contrary  would  not  help  the  matter."  The 
United  States  Supreme  Court  takes  the  same  view,  and, 
recognizing  its  duty  to  declare  the  law  in  all  cases  of  fraud, 
supplements  the  foregoing  views  with  a  clear  illustration  of 
that  feature  of  fraudulent  tendency  in  the  transaction,  and 
of  that  conduct  to  which  the  law  conclusively  imputes  a 
fraudulent  effect,  which  are  totally  independent  of  any  of 
the  intentions  of  the  actors. 

The  same  distinction  had  been  earl}-  taken  in  New  York, 
in  Goodrich  v.  Downs ^  and  Cunningham  v.  Freeborn,^  viz: 
that  the  question  of  fraudulent  intent  to  be  left  to  a  jury 
was  a  wholly  different  question  from  that  of  fraud  in  law, 
which  the  courts  are  impelled  to  declare  existing  in  any 
conveyance  which  reserves  a  benefit  to  the  assignor.^ 

§  75.  The  doctrine  of  Robinson  v.  Elliott  adopted  in 
Indiana.  — This  decision  of  the  highest  court  in  America 
has  not  been  without  influence  even  in  Indiana.  The  ques- 
tion has  been  again  presented  there,  in  Mobley  v.  Letts.* 
Perhaps  it  was  impossible  that  the  issues  could  be  more 
sharply  presented,  with  a  view  of  eliciting  a  conclu- 
sive adjudication  of  the  question,  in  respect  to   not  only 

1  G  Hill,  438. 

2  11  Wend.  240. 

*  See  a  further  consideration  of  this  question,  post,  sect.  151. 
*,61  Ind.  11  (1878). 

*  114 


DOCTRINE    OF   THE   AMERICAN   MAJORITY.  §    75 

the  Indiana  statute  before  referred  to,  but  the  common  law 
doctrine  also.  In  the  Circuit  Court,  a  jury  had  found  a 
general  verdict  in  favor  of  the  mortgagee,  and  against  his 
antagonists  who  were  execution  creditors  of  the  mortgager  ; 
and  had  also  found  by  a  special  verdict,  at  the  instance  of 
the  mortgagee,  that  there  was  in  the  transaction  no  fraudu- 
lent  intent.  But  at  the  instance  of  the  execution  creditors, 
the  jury  had  also  found,  by  special  verdict,  an  understand- 
ing between  the  parties  that  the  mortgager  was  to  continue 
in  possession  of  the  stock  of  goods  with  the  right  to  con- 
tinue business  and  to  make  sales  as  usual ;  though  they 
found  also  that  the  mortgagee  did  not  consent  to  have  the 
proceeds  of  sales  applied  to  the  payment  of  any  debt  besides 
his  own.  The  Circuit  Court,  declining  to  give  judgment  for 
the  execution  creditors  on  the  special  verdict  they  relied  on, 
gave  judgment  for  the  mortgagee  on  the  general  verdict  in 
his  favor.  Thus  it  was  imperative  upon  the  appellate  court 
to  determine  whether  the  statute  as  to  fraudulent  intent 
controlled  the  case,  and  also  whether  the  question  of  intent 
was  at  all  involved.  Nor  did  the  court  hesitate,  as  in  New 
Albany  Ins.  Co.  v.  Wilcoxson,  to  decide  the  case  upon 
principle.  The  stipulation  in  the  mortgage,  which  allowed 
the  mortgager  "  the  privilege  of  using  "  the  stock  of  goods, 
was  held  to  imply  necessarily  ' '  the  sale  thereof  by  him  in 
the  ordinary  course  of  his  business,"  and  nothing  else.  The 
proposition  advanced  argumentatively  in  New  Albany  Ins. 
Co.  V.  Wilcoxson,  that"  if  a  mortgage  is  executed  merely 
as  a  cloak  to  protect  property  in  the  hands  of  a  mortgager 
from  creditors  other  than  the  mortgagee,  the  mortgao^er 
still  retaining  possession,  and  the  right  of  disposition,  and 
these  facts  appearing  upon  the  face  of  the  instrument,  they 
would,  as  a  legal  proposition^  vitiate  it,  and  a  court  should 
so  declare,"  was  adopted  as  the  law  of  the  case;  and  this, 
and  the  further  proposition  that  "if,  as  in  this  case,  the 
mortgage  does  not  contain  any  stipulation  or  covenant,  on 

115 


§  76    FRAUDULENT  MORTGAGES  OF  MERCHANDISE. 

the  part  of  the  mortgager,  that  he  will  apply  the  proceeds 
of  the  sales  of  the  mortgaged  stock,  so  used  by  him,  to  the 
payment  of  the  mortgage  debt,  or  the  debt  of  any  other 
creditor,  in  our  opinion,  such  mortgage  is,  and  ought  to  be 
declared  to  be,  void  on  its  face,  as  against  the  other  credit- 
ors of  the  mortgager,"  were  announced  as  the  law  of 
Indiana.  Robinson  v.  Elliott  was  cited  with  express  ap- 
proval. Thus  early  was  realized  the  confident  expectation 
of  Mr.  Justice  Davis,  expressed  in  the  latter  case,^  that  when 
a  similar  case  should  again  arise  in  the  Supreme  Court  of 
Indiana,  "  it  would  be  decided  in  accordance  with  the  views 
we  have  presented." 

This  decision  was  advisedly  adhered  to  in  Davenport  v. 
Foulke,-  in  w^hich  case,  again,  no  difficulty  was  experienced 
in  construing  the  retained  possession  and  use  of  the  stock 
of  goods,  under  the  circumstances  of  the  case,  as  necessarily 
implying  a  power  of  sale,  which  would  be  "the  only  rea- 
sonable use  the  mortgager  could  make  of  it."  Mr.  Her- 
man's condensed  statement  of  the  doctrine  was  cited  with 
approval;  "It  is  not  the  simple  fact  of  possession  by  a 
mortgager  that  will  avoid  the  mortgage,  but  it  is  the  pos- 
session with  the  power  of  sale  which  defeats  the  instru- 
ment."^ 

The  same  rule  will  not  apply,  however,  if  the  stipulation 
be  that  the  proceeds  of  sales,  after  paying  expenses,  are  to 
be  paid  to  the  mortgagees  ;  this  arrangement  will  be  sus- 
tained unless  shown  by  extrinsic  facts  to  be  otherwise  ob- 
jectionable.* 

§  76.  Doubtful  cases  in  Indiana.  —  In  Morris  v.  Stern,^ 
where  the  mortgage  had  no  stipulation  on  the  subject,  an 

1  22  Wall,  at  p.  526. 

2  68  Ind.  882 ;  34  Am.  Kep.  265  (1879). 

3  Herman  on  Chat.  Morts.  236. 

«  McLaughlin  v.  Ward,  77  Ind.  383 ;  Lockwood  v.  Harding,  79  Ind.  129. 
5  80  Ind.  227. 

116 


DOCTRINE   OF   THE    AMERICAN   MxVJORITY.  §    76 

allegation  by  the  administrator  of  the  mortgager  that  the 
mortsrairer  was  allowed  to  retain  and  sell  the  jjoods,  was 
held  to  be  no  defence  to  the  morto-ao-ee's  action  for  a  fore- 
closure  of  the  mortgage,  unless  intentional  fraud  were 
proven.  The  cases  of  Mobley  v.  Letts  and  Lockwood  v. 
Harding  Avere  cited  as  authorities  in  this  case,  upon  the 
question  of  fraud;  but  it  is  difficult  to  see  their  pertinence, 
in  view  of  the  general  principle  that  all  conve^'ances,  though 
fraudulent  as  to  third  persons,  are  good  between  the  par- 
ties. It  may  have  been  this  citation  which  subsequently  led 
the  "  Supreme  Court  Commissioners  "  of  Indiana  to  decide 
McFadden  v.  Hopkins^  without  reference  to  either  Mobley 
V.  Letts  or  Davenport  v.  Foulke.  The  case  was  a  contro- 
versy between  two  successive  mortgagees  of  the  same  stock 
of  goods,  each  of  whom  had  allowed  the  mortgager  to  con- 
trol and  sell  the  goods.  The  junior  mortgagees  having  pur- 
chased of  the  mortgager  a  portion  of  the  mortgaged  goods, 
were  sued  for  their  value  by  the  senior  mortgagee,  who 
recovered  judgment  against  them  therefor.  The  case  was 
disposed  of  on  the  ground,  that  the  prior  mortgage  was 
valid  as  against  a  sale  by  the  mortgager,  unless  intentional 
fraud  were  proved.  If  the  principle  of  Mobley  v.  Letts 
and  Davenport  v.  Foulke  had  been  applied  to  the  senior 
mortgagee  alone,  he  would  have  failed  in  his  action  because 
of  the  fraud  in  his  own  transaction  ;  and  if  it  were  applied 
to  both  mortgages,  alike,  as  it  might  properly  have  been, 
the  case  might  have  been  dismissed  without  judgment,  both 
parties  hehigin pari  delicto.  How  far  the  failure  to  apply 
that  principle  renders  this  case  of  McFadden  v.  Hopkins  a 
disturbing  element  in  the  jurisprudence  of  Indiana  will  de- 
pend on  the  extent  to  which  the  decisions  of  the  "  Commis- 
sioners," when  adopted  by  the  Supreme  Court,  are 
considered   as  authority. 

The  later  case  of  Louthain  v.  Miller  ^  suo-ojests  further 

1  81  Ind.  459  (1882).  '  85  Ind.  161. 

117 


§    76         FKAUDL'LENT   MORTGAGES   OF   MERCHANDISE. 

doubts  as  to  the  present  position  of  the  Supreme  Court  of 
this  State  upon  the  question.  As  in  Mobley  v.  Letts,  while 
the  mortfrao^ee  had  a  fjeneral  verdict  in  his  favor,  his  adver- 

COO  ' 

saries  had  a  special  verdict  finding  the  fact  of  an  agreed 
power  of  sale.  The  court,  while  reversing  the  judgment 
on  another  and  different  ground,  declined  to  declare  the 
transaction  fraudulent  by  reason  of  the  reserved  power  of 
sale,  and  said  that  the  question  of  fraud  in  this  case  was 
one  of  fact  for  the  jury,  not  one  of  law  to  be  decided  by 
the  court.  Mobley  v.  Letts  was  overlooked,  and  no  kindred 
case  was  referred  to;  the  authorities  cited  being  JNIorris  v. 
Stern,  McLaughlin  v.  Ward,  Lock  wood  v.  Harding,  and 
Rose  V.  Colter  ;Mn  which  last  named  case  a  reserved  power 
of  sale  was  not  involved. 

1  76  Ind.  590. 
118 


THE  MAJORITY  DOCTKINE  FAVORED.  §    77 


CHAPTEE  lY. 

THE  MAJORITY  DOCTRINE  FAVORED. 

SeCTiON  77.  Reserved  power  of  sale  recognized  iu  Pennsylvania  as  a  vic- 
ious feature. 

78.  Fraud  not  resting  in  intent,  distinguislied. 

79.  Reserved  power  of  sale  recognized  in  Connnecticut  as  a  vic- 

ious feature. 

80.  Fraudulent  tendency  a  fatal  feature  of  such  conveyances. 

81 .  The  North  Carolina  view  of  fraud  in  conveyances ;  a  legal 

question  purely,  but  resting  on  intent. 

82.  Confusion  resulting  from  supposed  distinction  between  fraud 

in  law  and  actual  fraud. 

83.  Attempt  to  solve  the  difficulty  by  treating  fraud  in  convey- 

ances as  a  question  of  procedure. 

84.  Renewed  difficulty  in  cases  involving  a  reserved  power  of 

sale. 

85.  The  doctrine  iu  question  enforced  as  a  rule  of  presumptive 

evidence. 

86.  Arkansas  approves  the  doctrine  unqualifiedly. 

87.  Nebraska  adopts  the  doctrine  with  limitations. 

Pennsylvania. 

§  77.  Reserved  power  of  sale  recognized  as  a  vicious 
feature. —  Pennsylvania  is  one  of  those  States  which  ad- 
heres to  the  rule,  early  adopted,  that  retention  of  posses- 
sion by  the  grantor  in  a  sale  or  mortgage  of  chattels  is 
fraudulent  /;er  se}  Possession  is  in  this  State  deemed  to 
be  the  matter  of  principal  consideration  in  this  class  of 
cases.  This  feature  of  her  jurisprudence  allows  her  courts 
but  little  opportunity  for  considering  the  precise  question 
now  under  discussion.     But  the  cases  which  involve   the 

1  Carpenter  t;.  Mayer,  5  Watts,  483  (1836);  Garman  v.  Cooper,  72  Penn. 
St.  32  (1872). 

110 


§  77    FRAUDULENT  MORTGAGES  OF  MERCHANDISE. 

element  of  a  power  of  disposition  of  the  goods  arc  in  accord 
with  those  from  other  States  already  referred  to.  In 
Welsh  V.  Bekey,^  a  mortgage  of  crops,  under  which  the 
mortgager  was  to  retain  possession  and  make  sales,  the 
mortgagee  to  have  nothing  but  the  proceeds  of  the  sales, 
was  held  fraudulent.  It  was  stipulated  in  the  instrument 
that  "  Hayden  shall  take  care  of  the  crop  while  growing,  cut, 
thresh  and  carry  it  away,  under  the  direction  and  control  of 
Welsh,  who  is  to  have  his  money  out  of  the iwice  of  it."  The 
court  said :  "  Taking  care  of  grain,  growing,  reaping,  thresh- 
ing and  sellmg  it,  include  all  the  notorious  acts  of  ownership 
that  are  ordinarily  exercised  in  relation  to  this  species  of 
property  ;  while  the  act  of  giving  directions  is  a  matter 
usually  known  only  to  the  parties."  So,  notwithstanding 
the  "  admitted  purity  of  their  intentions,"  this  transaction 
between  the  parties  was  declared  fraudulent  as  to  creditors, 
upon  the  authority  of  Ryall  v.  Rolle,-  on  the  subject  of  re- 
taining possession  with  power  of  disposition  of  the  goods. 
In  Clow  V.  Woods,^  a  somewhat  similar  case,  involving  a 
tannery  and  the  tanning  business,  including  hides  in  vats, 
the  possession  of  the  mortgager  was  held  fraudulent  under 
the  authority  of  the  English  cases.  Gibson,  C.  J.,  did  not 
object  to  the  transaction  "  altogether  on  the  ground  of  the 
possession  not  having  been  immediately  delivered,"  and 
thought,  if  this  were  the  only  question,  "  a  good  reason 
might  be  assigned  for  the  mortgager  continuing  in  posses- 
sion as  the  agent  of  the  mortgagee."  But  the  difficulty  in 
the  case  was  that  after  a  general  conveyance,  without  a 
schedule,  the  grantor  continued  in  possession,  and  went  on 
with  the  tannino;  business  as  before,  so  that  he  "miojhthavc 
continued  to  carry  on  business,  and  to  purchase  hides,  bark 
and  tools  as  usual ;  and  whether  he  should  be  able  to  shelter 

1  1  Penn.  67  (1829).  ^  1  Wilson,  2G0. 

3  5  Serg.  &  R.  275;  9  Am.  Dec.  340  (1819). 

120 


THE    MAJOKITV    DOCTKIXE    FAVOKED.  §    77 

such  property  under  the  mortgage,  would  depend  on  the  se- 
crecy and  adroitness  with  which  the  matter  was  managed." 
The  learned  judge  added,  as  to  the  inherent  fraud  in  the 
transaction:  "  I  do  not  suppose  the  parties  had,  in  fact,  a 
fraudulent  view  ;  but  as  such  a  transaction  might  be  turned 
to  a  dishonest  use,  it  was  their  duty,  as  far  as  in  their  power, 
to  secure  the  public  against  it." 

Hower  v.  Geesaman^  and  Bentz  v.  Rockey^  are  the 
most  satisfactory  authorities  upon  the  immediate  question. 

In  the  first  named  case,  the  assignor,  under  a  general  as- 
signment for  the  benefit  of  creditors,  carried  on  as  usual  his 
business  as  a  tavern-keeper,  and  also  his  business  as  a  hatter. 
The  transaction  was  held  fraudulent  in  law  and  void,  the 
question  devolving  upon  the  court  to  settle  as  one  of  law 
purely.  It  was  not  alone  the  omission  of  a  schedule,  nor  the 
preferences  given,  nor  the  limitation  of  time,  nor  the  mere 
retention  of  possession,  which  dictated  the  judgment.  The 
court  said:  "  We  are  all  of  opinion  that  the  deed  of  assign- 
ment was  null  and  void  as  against  creditors,  and  fraudulent 
in  law.  The  deed  is  absolute  upon  its  face ;  the  grantor 
retained  possession ;  he  held  and  used  the  property  as  be- 
fore ;  he  sold  and  disposed  of  it  as  his  own." 

So  in  Bentz  v.  Rocke}',  where  it  appeared  to  be  a  part  of 
the  contract  of  sale  of  a  tannery  and  fixtures,  that  the  ven- 
dor, who  remained  in  possession,  was  to  have  a  part  of  the 
property  used  in  the  tanner's  business  as  compensation  for 
"  working  out  the  stock,"  this  was  held  such  a  reservation 
to  his  own  use  as  constituted  fraud  in  law  and  avoided  the 
transaction .  The  established  Pennsylvania  rule  was  referred 
to,  that  a  want  of  delivery  of  possession  would  render  the 
transaction  fraudulent;  but  outside  of  this  point,  the  court 
said  that  "  the  sale,  whether  fraudulent  in  fact  or  not,  was 
clearly  fraudulent  in  law,  because  a  portion  of  the  property 

1  17  Serg.  &  R.  251  (1828).  ^  69  Penn.  St.  71  (1871). 

121 


§  78    FRAUDULENT  MORTGAGES  OF  MERCHANDISE. 

embraced  in  the  bill  of  sale  was  secretly  reserved  for  the  use 
and  advantage  of  Roller." 

§    78.   Fraud   not   resting    in    intent,  distinguished. — 

Throughout  the  Ponn.-^ylvania  decisions  upon  the  subject  of 
conveyances  in  fraud  of  creditors,  the  distinction  is  taken 
and  carefully  preserved,  between  fraud  proven  by  a  fraud- 
ulent intent,  and  fraud  not  resting  in  intent.  In  Wilt  v. 
Franklin,^  the  distinction  was  thus  stated  by  Tilghman,  C. 
J.:  "Although  the  statute  13  Eliz.  is  bottomed  on  the 
supposition  of  an  immoral  intention,  yet  it  has  been  judged 
necessary  to  determine  that  certain  circumstances,  which  in 
their  nature  tend  to  deceive  and  injure  creditors,  shall  be 
considered  as  sufficient  evidence  of  fraud."  In  numerous 
cases,  it  is  declared  that  the  rule  as  to  mere  retention  of 
possession,  above  referred  to,  is  a  rule  of  law  for  the  courts 
to  act  on,  and  which  cannot  properly  be  submitted  to  a  jury  ; 
the  fraud  in  such  cases  is  a  sort  of  constructive  fraud,  or 
fraud  in  law.'^  The  inferior  courts  are  sometimes  criticised 
for  failing  to  observe  this  distinction.  Fraudulent  intent 
is  in  certain  cases  the  vital  question  to  be  submitted  to  a 
jury;  but  when  the  facts  are  found,  whether  they  estab- 
lish fraud  resting  in  intent,  or  fraud  of  some  other  kind,  it 
is  for  the  court  to  render  judgment  as  to  the  fraud.  The 
case  of  McKibbin  v.  Martin^  exhibits  the  very  pronounced 
views  of  the  Supreme  Court  of  this  State  upon  this  ques- 
tion. It  is  with  manifest  reluctance  that  a  transfer  of  a 
hotel  business  under  doubtful  and  suspicious  circumstances 
is  there  allowed  to  stand,  after  a  verdict  of  the  jury  that 
there  was  an  actual  and  sufficient  change  and  delivery  of 
possession   to   the  grantee;    but  this   verdict   is   taken   as 

'  1  Binn.  502 ;  2  Am.  Dec.  474  (1809). 

*  See  Worman  v.  Kramer,  73  Penn.  St.  378 ;  Graver  v.  Miller,  65  Id.  456 : 
Shattuck  V.  Haworth,  91  Id.  449;  Boud  v.  Bronson,  80  Jd.  360. 
»  64  Penn.  St.  352  ;  3  Am.  Eep.  588. 

122 


THE    MAJORITY    DOCTRINE    FAVORED.  §    79 

removing  the  case  out  of  the  category  of  those  where  pos- 
session was  retained  by  the  vendor.  The  occasion  was 
deemed  opportune  for  a  full  and  explicit  statement  of  the 
distinction  observed  in  this  State.  Clow  v.  Woods  was 
declared  to  be  the  Magna  Charta  of  Pennsylvania  law  on 
the  subject;  and  after  defining  actual  fraud  as  being  identi- 
cal with  fraud  resting  in  the  intent  of  the  parties,  the  court 
gave  this  definition  of  legal  or  imputable  fraud:  "  Fraud  in 
law  consists  in  acts  which,  though  not  fraudulently  in- 
tended, yet  as  their  tendency  is  to  defraud  creditors,  if  they 
vest  the  property  of  the  debtor  in  his  grantee,  are  void  for 
legal  fraud,  Avhich  is  deemed  tantamount  to  actual  fraud,  are 
full  evidence  of  fraud,  and  are  fraudulent  in  themselves, 
the  policy  of  the  law  making  the  acts  illegal."  This  state- 
ment of  the  rules  of  law  was  approved  in  Evans  v.  Scott.^ 
In  the  light  of  this  distinction,  the  cases  of  Clow  v.  Woods, 
Hower  v.  Geesaman,  and  Bentz  v.  Rockey  may  be  more 
clearly  understood,  in  reference  to  their  adjudications  of 
fraud  as  conclusively  shown  by  the  retention  of  the  goods 
with  discretionary  power  of  disposition,  and  entirely  irre- 
spective of  all  questions  of  intent. 

The  Pennsylvania  cases  cited  not  only  show  that  the  doc- 
trine of  Robinson  v.  Elliott,  Collins  v.  Myers  and  kindred 
cases  meets  with  favor  in  this  State,  but  they  indicate 
further  that  even  if  the  doctrine  of  fraud  as  resultino;  from 
possession  alone  were  to  be  abandoned,  the  courts  would 
adhere  to  the  view  that  possession  accompanied  by  a  dis- 
cretionary power  of  disposition  must  be  considered  fraudu- 
lent joer  se. 

Connecticut. 

§  79.  Reserved  power  of  sale  recognized  as  a  vicious 
feature.  —  The  Supreme  Court  of  Errors  of  Connecticut 
reached  a  similar  conclusion  in  Bishop  v.  Warner,^  but  with- 

1  89  Penn.  St.  136  (1879).        '  19  Conn.  460  (1849). 

123 


§    79  FRAUDULENT    MORTGAGES    OF   MERCHANDISE. 

out  ffivin":  similar  reasons  for  its  iudo-ment.  Mortfjaijcs  had 
been  given  upon  the  stock  in  trade  of  a  carriage  manufac- 
tory; there  was  a  formal  delivery  of  possession  to  the 
mortgagees,  after  Avhicli  the  mortgagers  continued  business 
with  the  goods  as  usual.  The  court  found  that  that  "up 
to  the  time  of  the  attachment,  the  mortgagers  were  carrying 
on  an  extensive  manufacturing  business  with  the  mortgaged 
property;  supplying  their  customers  from  day  to  day;  sell- 
ing the  carriages  as  they  were  finished,  and  as  they  were 
able  to  find  purchasers;  "  "generally,  we  are  aware,  pro- 
fessing to  act  as  agents  for  those  in  whom  it  was  claimed, 
for  the  time  being,  was  the  paper  title  to  the  property  ;  but 
yet,  in  fact,  acting  without  accountability  to  any  one ;  pay- 
ing their  debts  to  other  creditors  with  the  mortgaged  prop- 
erty, as  if  they  were  the  undisputed  owners."  The  vivid 
picture  thus  afforded  of  the  necessary  results  of  the  trans- 
action satisfied  this  intelligent  court  of  the  vice  inherent  in 
it,  without  the  necessity  of  reference  to  cases  adjudicated 
elsewhere.  The  principle  announced  by  the  court  as  the 
ostensible  basis  of  its  decision,  was  simply  that  the  posses- 
sion of  the  mortgagees  was  colorable  and  not  real ;  and  it 
is  intimated  that  the  parties  must  have  intended,  because 
they  must  have  known,  the  fraudulent  consequences  of  their 
transaction.  It  is  plain  that  the  court  felt  and  appreciated 
the  necessary  effect  and  tendency  of  the  transaction,  as  in 
itself  sufficient  to  make  it  fraudulent;  but  the  case  was 
treated  as  turning  on  intent,  doubtless  in  deference  to  the 
traditional  practice  of  testing  all  such  cases  by  the  statute  of 
13  Eliz.  This  court  has,  however,  clearly  seen  that  actual 
fraud  need  not  always  rest  on  intent.  It  had  already  been 
announced  in  Pettibone  v.  Stevens^  and  Beers  v.  Botsford,^ 
as  the  doctrine  in  this  State,  that  when  the  facts  of  a  case 
are  ascertained,  fraud  then  becomes  a  question  of  law  from 

'  15  Conn.  19;  38  Am.  Dec.  57.  ^  13  j^^  146. 

124 


THE    MAJORITY    DOCTRINE    FAVORED.  §    79 

those  facts  ;  "  ^7  is  the  judgment  of  the  law  on  facts  and 
intents;  "  a  principle  which  has  since  been  of  frequent  appli- 
cation in  the  adjudications  upon  fraud,  in  Connecticut.  It 
had  also  been  previously  held, ^  as  the  law  of  this  State,  that 
mere  retention  of  possession  by  the  grantor  in  a  sale  or  con- 
veyance of  chattels  furnishes  only  presumptive,  not  conclu- 
sive, evidence  of  fraud;  for  which  doctrine  the  English 
cases  of  Latimer  v.  Batson  '^  and  Martindale  v.  Booth  ^  were 
cited;  and  in  De  Forest  v.  Bacon,^  where  the  assignees  for 
preferred  creditors  under  a  general  assignment  were  to  take 
the  manufactory  and  raw  materials  on  hand,  and  themselves 
conduct  the  business  until  those  materials  were  worked  up, 
it  was  held  that  this  was  not  fraudulent  per  se,  but  that  the 
question  of  fraud  was  to  be  determined  by  the  intent  of  the 
parties. 

A  more  clear  expression  of  the  views  of  this  court  on  the 
particular  subject  was  given  in  the  recent  case  of  Lewis  v. 
McCabe.^  The  immediate  question  was  whether  a  condi- 
tional sale  of  goods,  reserving  title  in  the  vendor  until  pay- 
ment of  the  price,  should  be  sustained  as  valid;  which  was 
decided  in  the  affirmative.  But  the  goods  in  this  case  were 
liquors,  which  the  vendee  placed  in  his  stock  in  trade,  it 
being  expected  and  understood  that  he  should  sell  the  same 
in  the  course  of  his  business  ;  and  this  was  recognized  as  a 
distinguishing  feature  of  the  case.  It  was  therefore  consid- 
ered material  to  inquire  whether  the  arrangement  contem- 
plated sales  by  the  vendee  as  of  his  own  goods,  or  sales  as 
agent  for  the  vendor  which  should  transfer  his  reserved  title. 
The  latter  construction  was  adopted  by  the  court,  in  view 
of  the  facts  of  the  case.     A  contrary  construction  would 

1  Meade  v.  Smith,  16  Conn.  346 ;  Calkins  v.  Lockwood,  Id.  276 ;  41  Am. 
Dec.  143. 

2  4  B.  &  C.  652. 

3  3  B.  &  Adol.  498. 
*  2  Conn.  633. 

6  49  Conn.  141 ;  21  Am.  Law  Reg.  217  (1881). 

125 


§    81  FKAUDULENT    MORTGAGES    OF    MEUCIIANUISE. 

have  led  to  a  different  result.  It  was  conceded  that  there 
was  much  force  in  the  doctrine  that  possession,  with  the  jus 
disjponendi,  renders  such  transactions  fraudulent,  "  without 
regard  to  the  real  intent  of  the  parties;  "  and  it  was  said, 
"  If,  however,  the  contract  in  question  must  be  construed 
to  mean  that  the  plaintiff  authorized  McAvoy  to  sell  the 
property  as  his  own,  we  should  be  constrained  to  hold  it  so 
absolutely  inconsistent  with  the  retention  of  title  in  the 
plaintiff,  as  to  waive  or  make  void  the  condition."  ^ 

§  80.   Fraudulent     tendency     a    fatal     feature.  —  The 

principle  of  the  case  of  Bishop  v.  Warner  was  involved  in 
Pettibone  v.  Stevens,^  where  the  failing  debtor,  instead  of 
retaining  possession  and  power  of  sale  of  his  stock  of 
goods,  took  a  note  from  a  third  party,  the  payments  on 
which  he  was  to  use  for  the  support  of  himself  and  family, 
giving  to  the  same  third  party  his  own  note  for  an  equal 
sum,  which  was  to  be  secured  by  the  conveyance  of  the 
goods.  This,  as  a  reservation  to  the  use  of  the  debtor,  was 
condemned.  The  court  said  the  question  was  "  whether  the 
transaction  is  not  one  of  the  kind  calculated  to  hinder,  delay 
and  defraud  creditors,"  and  ruled  on  it  accordingly  as  a 
question  of  law,  adding,  "  we  have  no  hesitation  in  saying 
that,  if  tolerated,  it  would  become  an  inlet  to  fraud,  and 
lead  to  all  imaginable  abuse."  ^  These  citations  show  that 
fraudulent  tendency  is  plainly  recognized  in  Connecticut  as 
sufficient  to  invalidate  such  conveyances.* 

North  Carolina. 

§  81.  The  North  Carolina  view    of    fraud  in    convey- 
ances —  A  legal  question  purely,  hut  resting  on  intent. — 

Among  the  States  which  are  now  to  be  recognized  as  ap- 

^  For  New  York  cases  to  the  same  effect,  see  ante,  sect.  42. 

2  15  Conn.  19. 

3  p.  26. 

*  See  a  similar  case  in  Tennessee,  cited  sect.  59. 

126 


THE    MAJORITY    DOCTRINE    FAVORED.  §    81 

proving  this  rule  of  law,  is  North  Carolina.  The  decisions 
in  this  State,  in  the  first  cases  presented  which  involved  a 
conveyance  of  a  stock  of  goods  in  trade,  with  power  of  dis- 
position, are  somewhat  peculiar  ;  but  their  divergence  from 
the  general  authorities  on  the  subject  pertains  to  procedure 
rather  than  to  substantive  law.  This  will  appear  from  an 
examination  of  the  current  of  earlier  adjudications  in  this 
State  on  the  subject  of  fraudulent  conveyances  in  general. 
On  questions  of  fraud,  the  Supreme  Court  of  this  State  had 
already  made  some  peculiar  distinctions,  which  related 
mainlj"  to  procedure,  as  they  have  been  interpreted  in  the 
later  decisions. 

It  was  well  established  that  reservations  of  whatever  kind, 
to  the  use  of  the  grantor,  would  in  North  Carolina  serve  to 
invalidate  a  conveyance  ;  such  as  a  parol  agreement  for 
redemption ;  ^  an  agreement  that  part  of  the  property  be 
transferred  to  the  debtor's  wife  and  children  ;  ^  an  asfree- 
ment  to  keep  the  transaction  secret  for  a  time ;  ^  or  a  pref- 
erence given  to  such  creditors  as  will  release  in  full.* 

On  the  question  of  possession  alone,  under  conveyances 
of  property,  it  was  settled,  after  some  discussion,  that  this 
circumstance  furnished  only  presumptive  evidence  of  fraud, 
which  mio;ht  be  rebutted.^ 

In  two  cases,  Euffin,  C.  J.,  for  the  Supreme  Court,  had 
carefully  explained  and  illustrated  the  respective  provinces 
of  court  and  jury  in  cases  involving  fraud  in  conveyances, 
in  which  it  was  clearly  shown  that  all  such  cases  present  the 
elements  of  both  law  and  fact.  In  Leadman  v.  Harris,*' 
where  it  was  claimed  that  the  entire  secret  purpose  of  a 

1  Gregory  v.  Perkins,  4  Dev.  Law,  50  (1833). 

2  Kissam  v.  Edmundson,  1  Ired.  Eq.  180  (1840). 
»  Hafner  v.  Irwin,  1  Ired.  Law,  490  (1841). 

♦  Palmer  v.  Giles,  5  Jones  Eq.  75  (1859). 

*  Cox  V.  Jackson,  1  Hay.  423  (1796) ;  Ingles  v.  Donalson,  2  Hav.  57 
(1798);  Trotter  v.  Howard,  1  Hawks,  320  (1821);  Eea  v.  Alexander,  5  Ired. 
Law,  644  (1845). 

«  3  Dev.  Law,  144  (1831). 

127 


§    81  FKAUDULENT    310KTGAGES    OF    3IEKCHANDISE. 

conveyance  was  to  secure  the  property  conveyed  to  the 
benefit  of  the  debtor,  and  the  case  thus  presented  the  ques- 
tion of  fraudulent  intent,  the  learned  judge  said:  "  I  do 
not  question  the  power,  nor  the  sole  power,  of  the  jury,  to 
find  the  intent,  when  it  is  to  be  made  to  appear  by  matter 
extrinsic  of  the  deed.  But  what  intent  is  in  law  fraudu- 
lent, the  court  must  inform  the  jury;  else  (he  law  can  have 
no  rule  upon  the  doctrine  of  fraud,  and  every  case  must 
create  its  own  law.'''  And  again,  "  If,  therefore,  as  is  men- 
tioned in  Twyne's  Case,  a  conveyance  be  taken  for  a  true 
debt,  upon  the  understanding  that  the  debtor  is  to  have  the 
use  of  the  property,  that  although  it  is  apparently  conveyed 
in  satisfaction  or  security  for  it,  yet  the  heneficial  owner- 
ship is  to  be  ivith  the  debtor,  it  is  void.  Why?  Because  it 
is  taken,  that  in  truth,  it  was  not  taken  for  the  very  pur- 
pose of  satisfying  the  debt,  but  under  the  cover  thereof, 
for  the  ease  and  favor  of  the  debtor,  either  generally  or  for 
some  definite  time.  What  temptations  would  it  not  hold  out 
to  dishonest  men  to  run  up  scores,  without  the  smallest  in- 
tention of  making  payment,  if,  by  finding  a  friend  amongst 
their  creditors,  they  could  enjoy  their  property  all  their 
lives  ao;aiust  the  other  creditors  ?  "  So  it  was  held  that  the 
trial  court  should  have  plainly  told  the  jury  that  the  imputed 
intent  in  this  case  Avould  have  rendered  the  conveyance 
void,  leaving  them  simply  to  find  the  facts  as  to  such  intent. 
And  in  Gregory  v.  Perkins,^  where  the  trial  court  had 
refused  to  instruct  the  jury  that  a  secret  agreement  for  re- 
demption would  render  void  a  conveyance  absolute  on  its 
face,  and  had  "  ruled  that  the  question  of  fraud  was  for  the 
jury  alone,"  the  appellate  court  conceived  that  its  decisions 
on  the  question  of  possession  alone,  as  evidence  of  fraud, 
had  been  misunderstood;  and  Ruffin,  C.  J.,  further  ex- 
plained the  law  of  all  such  cases  as  follows:  '  "Fraud  is 
matter  of  law.     It  is  stated  in  the  books  to  be  a  conclusion 

J  4  Dev.  Law,  60.  ^  p^  53, 

128 


THE    MAJORITY    DOCTRINE    FAVORED.  §    81 

of  law  upon  facts  and  intents  found  or  admitted.  The  word 
is  expressive  of  a  legal  idea,  and  admits  of  a  legal  defini- 
tion ;  and,  therefore,  is  correctly  stated,  as  a  general  propo- 
sition, to  be  matter  of  law.  When  an  act  or  intent  is 
stated,  it  is  the  province  of  the  court  to  pronounce  whether 
that  is  injurious  and  covinous.  But  as  persons  perpetrating 
frauds  seldom  express  them  explicitly,  but  generally  con- 
ceal them  under  the  appearance  of  fairness,  it  is  often  — 
indeed  seldom  otherAvise  —  difficult  to  ascertain  the  real 
purpose  of  the  transaction.  It  is  then  the  province  of  the 
jury  to  find  the  actual  intent.  In  that  sense,  fraud  is  called 
a  mixed  question  of  law  and  fact.  But  it  is  never  exclusively 
one  of  fact,  as  was  supposed  in  this  case  ;  nor  do  the  cases  in 
this  court,  alluded  to,  support  such  an  idea,  when  properly 
understood."  And  after  stating  the  rule  in  North  Carolina, 
on  the  subject  of  possession  alone,  to  be,  that  the  jury  find 
simply  the  fact  as  to  the  intent  of  the  possession,  whether 
to  give  a  false  credit,  or  otherwise,  he  continued  :  *'  It  is 
not  held,  that  the  jury  shall  give  to  those  intents,  or  to  a 
delusive  credit,  such  effect  as  to  them  may  in  each  case 
seem  proper.  That  the  law  declares;  and  the  security  of 
the  creditors  depends  upon  the  fixed  principles  of  the  law, 
and  not  on  the  uncertain  judgment  of  jurors  as  to  what  is 
covin.  If  a  debtor  convey  his  property  without  considera- 
tion and  in  trust  for  himself,  it  is  fraudulent;  and  if  that 
appear  in  the  conveyance,  the  court  adjudges  it  to  be  void; 
for  the  party  cannot  show  the  deed  under  which  he  claims 
title,  without  also  showing  the  intent.  If  it  be  not  so  ex- 
pressed, but  be  secretly  reserved,  then  its  existence  must 
be  found  by  the  jury.  Then  the  same  consequence,  as  a 
legal  consequence,  follows  from  the  fact  thus  found  by  the 
jury,  as  from  the  same  fact  as  admitted  by  the  party." 
These  views  are  again  industriously  reaffirmed,  with 
further  explanations,  in  Foster  v.  Woodfin,^  a  case  of  re- 

J  Hired.  Law,  339  (1850). 

9  129 


§    81         FRAUDULENT   MORTGAGES   OF   MERCIIAXDISE. 

tained  possession  of  a  slave.  They  are  in  entire  harmony 
with  the  numerous  cases  in  which  mortgages  on  stocks  of 
goods,  with  power  of  sale  reserved,  have  been  declared 
fraudulent  pe?'  se,  with  the  single  exception  that  Euffin,  C. 
J.,  did  not  make  an  explicit  recognition  of  fraudulent 
tendency  as  a  basis  of  fraud,  distinct  from  fraudulent 
intent.  In  the  opinion  of  that  learned  judge  and  his 
associates,  fraud  in  disputed  conveyances  always  depends 
on  intent;  it  is  necessary  always  that  the  intent  to  de- 
fraud be  ascertained  or  admitted;  in  cases  where  such 
intent  does  not  distinctly  appear,  it  is  by  a  process  of 
imputation  of  such  intent  that  the  law  declares  the  transac- 
tion fraudulent ;  and  where  the  real  character  of  the  agree- 
ment is  involved  in  doubt,  a  verdict  of  a  jury  on  the  facts 
is  required,  and  is  always  to  be  sought  with  reference  to 
the  question  of  intent.  These  opinions  may  be  read  be- 
tween the  lines  in  the  cases  above  named.  They  appear 
more  clearly  in  Moore  v.  Collins,^  Cannon  v.  Peebles '^ 
and  Hafner  v.  Irwin  ;  ^  in  which  last  named  case  it  was  said 
by  Gaston,  J. :  "  Every  contrivance  to  the  intent  to  hinder 
creditors,  directed  to  that  end,  is  malicious,  that  is  to  sqy, 
wicked.  Where  such  hindrance  is  but  an  incidental  conse- 
quence of  an  act  not  directed  to  that  end,  and  bona  fide  done 
with  another  and  rightful  intent,  it  may  be  regretted  as  an 
unfortunate  result,  but  cannot  be  held  to  impart  to  the  act  a 
wicked  or  malicious  intent."  Even  these  nice  distinctions 
do  not  of  necessity  conflict  with  the  idea  that  a  fraudulent 
tendency  is  inherently  fraudulent ;  for  if  it  be  said  that  an 
agreement  which  has  such  a  tendency  cannot  in  law  be  con- 
sidered as  done  with  "  a  rightful  intent,"  there  would  be 
room  for  the  exercise  of  the  North  Carolina  imputation  of 
a  fraudulent  intent. 

1  3  Dev.  Law,  126  (1831).  ^  4  ired.  Law,  204  (1843). 

»  1  Ired.  Law,  490  (1841). 
130 


THE  MAJORITY  DOCTRINE  FAVORED.        §  82 

§  82.  Confusion  reswlting"  from  supposed  distinction 
between  fraud  in  law  and  actual  fraud.  —  But  the  prin- 
cipal element  of  confusion  in  tliese  distinctions  is  the 
resulting  one  as  to  "  fraud  in  law  "  and  "fraud  in  fact," 
involving,  as  it  does,  the  attempt  to  place  "  fraud  in  law  " 
and  "actual  fraud"  in  antithesis,  and  to  make  the  latter 
term  synonymous  with  fraudulent  intent.  If  "  fraud  in 
law  "  can  be  only  such  fraud  as  the  court  can  declare  from 
the  face  of  a  conveyance,  or  from  facts  which  are  susceptible 
alone  of  a  construction  adverse  to  the  transaction,  and  if 
actual  fraud  always  has  a  fraudulent  intent  as  its  basis,  how 
can  the  court  find  and  declare  the  fraud  in  any  doubtful  or 
complicated  case,  when  a  jury  has  rendered  a  verdict  in 
favor  of  the  conveyance,  no  matter  how  thoroughly  the 
court  may  be  convinced  that  its  own  view,  primarily,  would 
have  been  otherwise?  This  was  the  problem  which  was 
presented  to  the  learned  court  in  Hardy  v.  Skinner/  and 
Young  V.  Booe.^  In  each  of  these  cases,  there  was  a  deed 
of  trust  upon  property,  including  grain  and  provisions  on 
a  farm,  the  use  of  which  was  reserved  to  the  grantor.  In 
each  case,  the  party  attacking  the  conveyance  claimed  that 
this  reservation  of  the  use  of  consumable  property  made  the 
transaction  fraudulent  in  law,  and  asked  the  judgment  of 
the  court  accordingly ;  but  it  was  expressly  admitted  that 
there  was  no  intent  to  defraud  creditors,  and  a  verdict  was 
thereupon  taken  in  favor  of  the  conveyance.  Thus  the 
question  was  sharply  presented  of  fraud  as  a  conclusion  of 
law,  upon  the  facts  of  the  case,  irrespective  of  the  verdict 
of  a  jury.  In  Hardy  v.  Skinner,  the  reservation  of  the 
use  was  for  the  period  of  three  years ;  and  the  Supreme 
Court  thought  it  was  "  a  singular  and  extremely  suspicious 
transaction,"  and  that  it  denoted  "  a  part  of  the  purpose 
to  have  been  to  secure  a  benefit  to  the  insolvent  debtor," 

»  9  Ired.  Law,  191  (1848).  ^  11  Ired.  Law,  347  (1850). 

131 


§  82    FRAUDULENT  MORTGAGES  OF  MERCHANDISE. 

and  intimated  that  the  jury,  as  men  of  common  sense, 
should  liave  so  found.  But  even  the  inclination  of  the 
court  to  rest  the  securitj^  of  the  creditors  "upon  the  fixed 
principles  of  the  law,  and  not  on  the  uncertain  judgment 
of  jurors,"  did  not  avail  the  creditors  in  this  case.  The 
verdict  of  the  jury  was  based,  in  part,  on  the  admission 
that  there  was  no  "  fraud  in  fact,"  that  is,  no  fraudulent 
intent ;  and  the  Supreme  Court  considered  that  the  attack- 
ing party  gave  up  his  case  by  this  admission;  and  that 
inasmuch  as  there  might  have  been  other  favorable  circum- 
stances,  not  indeed  appearing  in  the  case,  but  which  might 
have  been  assumed  by  the  jury,  the  verdict  could  not  be 
set  aside  ;  the  fraud  could  not  "  be  inferred  absolutely,  as 
a  dry  matter  of  law,  by  the  court."  In  Young  v.  Booe, 
the  reservation  of  the  use  was  for  eleven  months  only,  and 
there  were  other  circumstances  in  the  case,  favorable  to 
the  secured  creditor,  among  them  being  the  fact  that  the 
possession  of  the  grantor  was  virtually  as  agent  of  the 
creditor ;  so  that  there  was  considerable  evidence  in  sup- 
port of  the  verdict.  Still,  the  circumstances  were  so 
suspicious  in  many  respects,  that  Ruffin,  C.  J.,  in  his 
opinion,  said  that  "  without  the  admission  on  the  part  of 
the  defendant,  that  there  was  no  actual  fraud  intended  in 
the  execution  of  the  deed,  the  court  would  hold  the  judg- 
ment to  be  erroneous."  Hardy  v.  Skinner  was  referred 
to  as  an  authorit}^  on  this  point,  and  as  in  that  case,  it  was 
the  admission  that  there  was  no  fraudulent  intent  in  the 
case,  which  sustained  the  verdict.  It  appears  from  these 
cases  that  the  distinction  taken  was  not  one  of  substantive 
law.  But  for  the  verdict  of  the  jury,  each  of  these  cases 
would  have  been  decided  otherwise.  Indeed,  in  Dewey  v. 
Little  John, ^  where  the  same  question  arose  in  equity, 
though  the  ultimate  decision  was  in  favor  of  the  convey- 

'  2  Ired.  Eq.  495  (1843). 

132 


THE  MAJORITY  UOCTEINE  FA  YOKED.        §  83 

ance  (because  the  reservation  was  found  not  to  be  for  the 
debtor's  benefit),  it  had  been  said  that  a  conveyance  of 
crops  or  other  property  consumable  in  the  use,  with  the 
possession  retained  by  the  grantor  for  his  own  use,  would 
be  fraudulent.  The  law  of  North  Carolina  seemed,  there- 
fore, plain.  The  only  difficulty  was  as  to  how  the  question 
should  be  determined  in  a  case  presented  to  a  jury.  It 
.was  a  question  of  procedure  merely ;  and  this  became  im- 
portant in  jury  cases  only,  in  respect  to  the  further  ques- 
tion of  the  province  of  the  jury,  and  the  issue  to  be  sub- 
mitted to  them. 

§  83.  Attempt  to  solve  the  difficulty  by  treating  fraud 
in  conveyances  as  a  question  of  procedure.  —  This  diffi- 
culty was  apparently  solved  in  Hardy  v.  Simpson,^  by  resort 
to  the  rules  of  procedure  concerning  presumptive  evidence. 
The  controversy  here  was  over  the  same  deed  involved  in 
Hardy  v.  Skinner.  A  new  suit  had  been  brought,  again 
attacking  the  conveyance ;  and  additional  evidence  having 
been  taken,  a  jury  had  again  rendered  a  verdict  in  favor  of 
the  deed.  Counsel  had  again  asked  the  trial  court  to  adjudge 
the  deed  fraudulent  upon  its  face,  which  had  been  declined. 
On  this  point,  the  appellate  court  adhered  to  the  doctrine 
of  Hardy  v.  Skinner,  in  which  case,  it  was  said,  "  the  mat- 
ter is  so  elaborately  discussed  as  to  make  it  unnecessary  to 
add  another  word."  But  counsel  had  now  gone  farther, 
and  had  requested  the  trial  court  to  instruct  the  jury  that, 
upon  the  face  of  the  deed,  there  y^as  prima  facie  evidence 
of  fraud,  and  that  the  defendant  had  offered  no  evidence  to 
explain  or  rebut  this  presumption.  This  view  was  taken  by 
the  appellate  court,  and  on  this  ground  a  venire  de  novo 
was  awarded.  Hardy  v.  Skinner  was  interpreted  as  decid- 
ing that  this  deed  bore  upon  its  face  a  presumption  of 
fraud,  which  it  was  incumbent  upon  the  defendant  to  rebut 

1  13  Ired.  Law,  132  (1851). 

133 


§  84    FRAUDULENT  MORTGAGES  OF  MERCHANDISE. 

by  evidence  ;  and  it  was  held  to  be  error  in  the  trial  court 
to  decline  to  tell  the  jury  that  there  was  no  such  evidence, 
and  ' '  to  leave  the  case  with  the  jury  upon  a  general  charge 
as  to  the  matter  of  fraud."  The  rules  of  law  in  such  cases 
were  further  stated  as  follows:  "  What  constitutes  fraud  is 
a  question  of  law.  In  some  cases  the  fraud  is  self-evident, 
when  it  is  the  province  of  the  court  to  so  adjudge,  and  the 
jury  has  nothing  to  do  with  it.  In  other  cases,  it  depends 
upon  a  variety  of  circumstances,  arising  from  the  motive 
and  intent ;  then  it  must  be  left  as  an  open  question  of  fact 
to  the  jury,  with  instructions  as  to  what,  in  law,  constitutes 
fraud.  And  in  other  cases,  there  is  a  presumption  of  fraud 
which  may  be  rebutted.  Then,  if  there  is  any  evidence 
tending  to  rebut  it,  that  must  be  submitted  to  the  jury ;  but 
if  there  is  no  such  evidence,  it  is  the  duty  of  the  court  so  to 
adjudge,  and  to  act  upon  the  presumption.  Fraud  is  very 
subtle,  and  frequently  eludes  the  grasp,  both  of  the  court 
and  jury.  When,  therefore,  the  court  has  hold  of  it,  there 
is  no  reason  for  passing  it  over  to  the  jury,  unless  there  is 
some  evidence  that  will  justify  them  in  coming  to  the  con- 
clusion that  the  presumption  is  rebutted."  This  case  was 
placed  by  the  court,  not  in  the  first  named  class,  where  the 
fraud  is  self-evident,  and  is  so  declared  by  the  court,  but  in 
the  third  class,  where  presumptions  are  indulged.  The  case 
thus  turns  upon  this  question  of  procedure,  with  respect  to 
presumptive  evidence. 

§  84.  Renewed  diflBleulty  in  cases  involving  a  reserved 
power  of  sale.  —  So  when,  in  the  recent  case  of  Cheatham 
V.  Hawkins,^  a  mortgage  deed  was  presented,  conveying  a 
stock  of  goods,  the  mortgager  reserving  possession  of  them 
for  nine  months,  "  the  implication  being  irresistible,  from 
the  very  nature  of  the  business,  that  he  was  to  continue  in 
selling  and  trading  as  before;"  the  case  being  recognized 

1  76  N.  C.  335  (1877). 

134 


THE    MAJORITY    DOCTIMNE    FAYOKED.  §    b4 

as  *<  unlike  and  stronger  than  the  cases  of  Young  v.  Booe 
and  Hardy  v.  Skinner ; ' '  and  yet  the  case  was  to  be  tried  as  a 
jury  case  by  the  court,  without  the  aid  of  a  jury,  new 
questions  arose.  How  was  the  case  to  be  treated?  And 
if  such  a  conveyance  were  deemed  fraudulent,  how 
should  the  fraud  be  declared?  And  again,  if  the  trial 
judge  should  decide,  as  was  done  in  this  case,  that  the  deed 
was  not  fraudulent,  how  should  an  appellate  court,  holding 
the  contrary  view,  proceed  in  reversing  the  decision ?  In 
analogy  to  the  doctrine  of  the  earlier  cases  above  cited,  the 
case  was  treated  with  reference  to  the  rules  concerning 
presumptive  evidence.  The  fatal  features  of  such  a  trans- 
action were  clearly  understood  and  vividly  portrayed. 
Said  the  appellate  court :  "  The  merchandise  retailed  lost 
the  power  of  identity  as  soon  as  sold.  The  corpus  itself 
was  lost  and  destroyed  beyond  pursuit  or  recovery.  The 
power  to  sell  was  the  power  to  destroy,  and  the  sale  was 
the  destruction  and  extinction  of  the  property.  If  there 
were  other  unsecured  creditors  at  the  time  of  this  assign- 
ment, and  no  other  property  of  the  debtor  than  that  con- 
veyed in  the  mortgage,  out  of  which  creditors  could  make 
their  debts,  the  fraudulent  intent  would  seem  to  be  irrebut- 
table," But  all  this  was  held  to  be  only  presumptive 
evidence.  "This  deed  approaches  the  verge  of  being 
fraudulent  in  law,  but  is  not  so.  To  find  fraud,  as  a  mat- 
ter of  law,  it  must  so  expressly  and  plainly  appear  in  the 
deed  itself  as  to  be  incapable  of  explanation  by  evidence 
dehors.'^  If  all  the  other  facts  of  the  case  had  appeared 
in  the  deed,  the  court  could  have  pronounced  it  fraudulent 
in  law.  But  as  they  appeared  aliunde,  the  case  as  pre- 
sented did  not  call  for  a  final  judgment,  but  for  rebutting 
evidence.  And  inasmuch  as  there  was  no  evidence  to  rebut 
the  presumption  of  fraud,  the  trial  judge,  as  a  court,  erred 
in  instructing  himself  as  a  jury,  that  there  was  evidence  to 
sustain  his  judgment;   and  the  case  was  remanded  in  order 

135 


§    84  FRAUDULENT    INIORTGAGES    OF    MERCHANDISE. 

that  evidence  to  rebut  the  presumption  might  be  intro- 
duced. On  tiie  same  principle  proceeded  the  case  of  Holmes 
V.  Marshall,^  where  there  was  a  trust  deed  upon  a  stock  of 
goods,  the  power  of  disposition  appearing  simply  from  the 
recital  giving  the  grantors  "  the  privilege  of  continuing 
their  business  for  one  year."  The  trial  court  had  applied 
to  the  case  the  rule  of  procedure  approved  in  Hardy  v.  Simp- 
son, and  had  charged  the  jury  that  the  deed  was  presump- 
tively fraudulent,  and  that  there  was  no  evidence  to  rebut 
the  presumption.  The  appellate  court  sustained  the  ver- 
dict, holding  that  the  mere  imorance  of  the  ofrantee  con- 
cerning  other  debts  owing  by  the  grantor  was  no  evidence 
at  all  in  rebuttal  of  the  presumption  ;  and  thus  the  convey- 
ance was  declared  fraudulent.  In  the  succeeding  year, 
again  arose  the  preceding  case  of  Cheatham  v.  Hawkins,^ 
and  this  time  with  evidence  offered  on  both  sides  in  respect 
to  the  presumption  of  fraud;  and  the  trial  court  and  the 
appellate  court  were  both  of  the  opinion  that  on  the  whole 
case  the  presumption  was  not  rebutted.  The  mortgage 
deed  was  accordingly  adjudicated  fraudulent.  The  cases 
of  Collins  V.  Myers,^  Griswold  v.  Sheldon,"*  and  Bank  v. 
Ebbert^were  referred  to,  with  approval  of  their  declara- 
tions that  such  conveyances  were  fvnudulent  per  se;  and 
it  was  said:  "  Acts  fraudulent  in  view  of  the  law,  because 
of  their  necessary  tendency  to  delay  or  obstruct  the  cred- 
itor in  pursuit  of  his  legal  remedy,  do  not  cease  to  be  such 
because  the  fraud  as  an  independent  fact  was  not  then  in 
mind.  If  a  person  does  and  intends  to  do  that  which,  from 
its  consequences,  the  law  pronounces  fraudulent,  he  is  held 
to  intend  the  fraud  inseparable  from  the  act.  To  leave  a 
stock  of  goods,  after  they  have  been  conveyed  by  mortgage, 
in  the  debtor's  possession,  and  subject  to  his  exclusive  con- 

1  78  N.  C.  262  (1878).  *  4  N.  Y.  581. 

2  80N.  C.  161.  5  9Hei3.  153. 

3  IG  Ohio,  547. 

136 


THE    MAJORITY    DOCTRINE    FAVORED.  §    85 

trol  and  disposition  as  if  they  were  his  own,  while  they  are 
at  the  same  time  placed  beyond  the  reach  of  execution,  is 
t  self  a  fraud.'"  The  conclusion  is  that  the  presumption  of 
fraud  upon  the  face  of  the  mortgage  deed  was  so  strong  in 
the  first  place  that  it  was  almost  impossible  to  repel  it,  and 
that  it  was  made  a  little  stronger  by  evidence  of  "  the  sur- 
rounding; facts  of  the  case  and  the  uses  made  of  the  o-oods." 
The  later  case  of  Boone  v.  Hardie^  illustrates  still  more 
clearly  the  distinction  taken  in  this  State  as  to  the  mode  of 
procedure.  It  was  another  case  of  a  deed  in  trust  on  a 
stock  of  goods,  the  proof  as  to  power  of  sale  appearing 
from  evidence  aliunde,  and  fraudulent  intent  bein<]r  neo-a- 
tived.  The  appellate  court  repeated  and  approved  the  divi- 
sion of  fraud  in  such  cases  into  three  classes,  which  was  made 
in  Hardy  v.  Simpson,  and  held  that  the  third  class  of  fraud, 
nameljs  that  resting  in  and  proven  by  intent,  was  not  in- 
volved in  the  case ;  and  an  issue  having  been  submitted  to 
the  jury  on  this  point,  it  was  held  to  have  been  an  immate- 
rial issue.  The  trial  court  had  been  of  opinion  that  the 
deed  was  fraudulent  upon  its  face  ;  but  the  appellate  court 
held  otherwise,  and  considered  it  a  case  involving  a  presump- 
tion only,  in  which  the  presumption  was  required  to  be  re- 
butted. Inasmuch  as  this  precise  question  had  not  been 
submitted  to  the  jury,  the  judgment  adverse  to  the 
validity  of  the  conveyance  was  reversed  and  a  new  trial 
was  ordered.  Yet  the  case  on  the  whole  was  very  similar 
to  Cheatham  v.  Hawkins,  the  language  of  the  opinion  in 
which,  at  the  last  hearing,  was  cited  with  approval. 

§  85.  The  doctrine  in  question  enforced  as  a  rule  of 
presumptive  evidence.  —  It  thus  appears  that  the  doctrine 
of  the  North  Carolina  courts  accords  with  that  of  other 
States  named,  in  opposition  to  the  validity  of  this  class  of 
conveyances.     But  it  is  to  be  enforced  in  their  own  peculiar 

1  83  N.  C.  470  (1880). 

137 


§  87    FRAUDULENT  MOKTGAGES  OF  MERCHANDISE. 

way,  so  as  to  preserve  the  harmony  of  the  State  jurispru- 
dence on  the  subject  of  procedure.  The  reservation  of  a 
power  of  sale  in  the  usual  course  of  business  does  not  con- 
stitute self-evident  fraud,  or  inake  the  conveyance  fraudu- 
lent per  se;  but  it  creates  a  presumption  of  fraud  so  strong, 
that  theoretically  it  is  almost  impossible  to  rebut  it,  and  in 
practice  it  is  quite  so.  The  trial  court  is  not  allowed  to  de- 
clare such  a  conveyance  fraudulent  per  se;  but  on  the  other 
hand,  it  must  tell  a  jury  to  accomplish  the  same  result  by 
apt  application  of  the  rules  of  presumptive  evidence ;  and 
should  a  jury  fail  to  do  this,  there  must  be  a  new  trial  to 
the  same  end  before  another  jury.  Such  conveyances  do 
not,  therefore,  fare  better  in  the  courts  of  this  State  than 
in  those  of  Virginia,  New  York  or  Ohio. 

Arkansas. 

§  86.  Arkansas  approves  the  doctrine  unqualifiedly.  — 

In  the  case  of  Sparks  v.  Mack,^  the  Supreme  Court  of 
Arkansas  was  not  called  upon  to  determine  the  precise 
question,  the  substantial  controversy  being  over  the  matter 
of  a  oreneral  reservation  to  the  use  of  a  ofrantor  in  an  abso- 
lute  conveyance ;  but  incidentally  the  question  was  consid- 
ered in  connection  with  a  stipulation  similar  to  that 
discussed  in  Robinson  v.  Elliott,  and  the  court  said  plainly 
that  if  the  absolute  conveyance  were  to  be  construed  as 
being  in  effect  only  a  mortgage  security,  the  case  would 
come  directly  within  the  ruling  in  Robinson  v.  Elliott. 
This  is  an  evident  concurrence  in  the  general  doctrine  of 
that  case. 

Nebraska. 

§  87.  Nebraska  adopts  the  doctrine  with  limitations.  — 

The  Supreme  Court  of  Nebraska  in  Tallon  v.  Ellison  ^  held 
a  mortgage  on  a  stock  of  goods,  with  a  power  of  sale  re- 

1  31  Ark.  66G  (1877).  ^  3  ^eb.  63  (1873). 

138 


THE   MAJORITY   DOCTRINE   FAVORED.  §    87 

served  by  the  mortgager,  to  be  fraudulent  and  void,  referring 
for  authority  to  the  New  York  and  Ohio  cases,  and  quoting 
from  the  language  used  in  Collins  v.  Myers. ^ 

This  ruling  was  afterwards  limited  in  its  application  to 
cases  where  the  power  of  sale  is  expressed  on  the  face  of  the 
instrument;-  and  it  was  suggested  that  a  provision  that  the 
mortgager  might  "retain  the  use  "  could  not  "  be  tortured 
into  a  power  of  sale."  In  all  such  cases  it  was  held  that 
' '  the  question  of  fraudulent  intent  is  a  question  of  fact  which 
must  be  submitted  to  a  jury."  Accordingly,  in  another 
case  at  the  same  term,  the  court  declined  to  take  the  view 
that  an  agreement  between  mortgager  and  mortgagee  allow- 
ing sales  by  the  former  would  be  fraudulent,  irrespective  of 
intent.  The  trial  court  had  been  asked  to  so  instruct  the 
jury,  but  had  refused,  and  the  Supreme  Court  approved  this 
action,  held  the  case  to  be  one  turning  on  intent,  and  sus- 
tained the  verdict  of  the  jury  in  favor  of  the  transaction, 
on  the  ground  that  the  question  of  intent  had  been  submitted 
under  a  proper  charge.^ 

Where,  however,  the  agreement  allowing  sales  appears  on 
the  face  of  the  mortgage,  it  was  intimated  that  the  rule  of 
Tallon  V.  Ellison  would  be  adhered  to,  though  the  question 
in  the  particular  case  was  as  to  the  validity  of  the  transac- 
tion between  the  parties.*  This  view  that  the  fraudulent 
agreement  must  appear  on  the  face  of  the  instrument,  in 
order  that  the  court  should  rule  upon  it  as  a  question  of  law, 
evidently  controlled  the  decision  in  the  late  case  of  Book 
Co.  V.  Sutherland,^  where  the  mortgager  remained  in  pos- 
session and  continued  his  business,  and  the  controversy, 
between  the  mortgagees  and  one  who  purchased  from  the 

1  16  Ohio,  at  p.  554. 

2  Williams  v.  Evans,  6  Neb.  216  (1877). 
^  Hedman  v.  Anderson,  6  Neb.  892. 

*  Gregory  v.  Whedon,  8  Neb.  373  (1879). 
6  10  Neb.  334;  6  N.  W.  Rep.  367  (1880). 

139 


§  87    FRAUDULENT  MORTGAGES  OF  MERCHANDISE. 

mortgager  in  payment  of  an  old  debt,  was  settled  with  refers, 
ence  to  the  question  of  notice  to  such  purchaser  of  the 
mortgage ;  and  the  question  of  fraud  inherent  in  the  trans- 
action was  not  referred  to  by  the  court,  and  apparently  was 
not  argued  by  counsel. 

In  this  State,  the  statutes  make  all  mortgages  of  chattels, 
unaccompanied  by  delivery  thereof,  presumptively  fraudu- 
lent as  to  creditors,  and  require,  in  order  to  avoid  the 
presumption,  proof  of  good  faith  and  of  the  absence  of 
fraudulent  intent.  These  provisions  were  held,  in  Turner  v. 
Killian,^  to  apply  to  a  mortgage  upon  a  stock  of  goods, 
under  which  the  mortgager  retained  possession  in  order  to 
sell  the  goods  and  remit  all  the  proceeds  to  the  mortgagees  ; 
provisions  which  would  be  held  not  fraudulent  in  many  juris- 
dictions ;  and  it  was  held  that  this  mortgage,  when  attacked, 
could  be  sustained  only  by  proof  that  it  was  *'  really  made 
in  good  faith  and  without  any  intent  to  defraud." 

In  Marsh  v.  Burley,^  it  was  held  that  recording  such  a 
mortgage  would  not  relieve  it  from  this  difficulty,  and  that 
the  registration  acts  were  not  intended  to  make  the  record- 
ing  of  the  mortgage  an  equivalent  for  change  of  possession, 
as  had  "  been  inadvertently  stated"  in  an  earlier  case;  and 
for  this  conclusion  Horton  z;.Williams^  and  Wood  v.  Lowry  * 
were  cited  as  authorities. 

Thus  it  appears  that  on  the  whole,  the  doctrine  in  ques- 
tion is  favored  in  Nebraska,  though  somewhat  embarrassed 
with  limitations  and  statutory  provisions. 

1  12  Neb.  580.  »  21  Minn.  187. 

2  13  Neb.  261.  *  17  Wend.  492. 
140 


VIEWS   OF   THE   AMERICAN   MINORITY.  §    88 


CHAPTEE    V. 

THE  VIEWS  OF  THE  AMERICAN  MINORITY. 

Section  88.  The  Michigan  view;  fraud  in  conveyauces  always  rests  upon 
intent;  a  dissenting  opinion. 

89.  Such  conveyances  uniformly  sustained  in  Michigan. 

90.  Reserved  power  of  sale  immaterial  in  Iowa;  the  common-law 

rule  abolished  by  statutes. 

91.  Such  conveyances  common  in  Iowa,  and  beyond  criticism; 

Stare  decisis. 

92.  The  reasons  for  the  Iowa  rule  examined. 

93.  The  Iowa  view  of  other  frauds  in  conveyances. 

94.  Reserved  power  of  sale  merely  a  badge  of  fraud  in  Massa- 

chusetts. 

95.  Earlier  cases  inharmonious. 

96.  The  doctrine  and  the  practice  settled  in  Massachusetts. 

97.  The  Maine  view;  the  question  one  as  to  evidence  merely. 

98.  Reserved  power  of  sale  merely  a  badge  of  fraud  in  Kentucky. 

99.  The  question  of  fi'aud  as  shown  by  mere  possession,  not  well 

settled  in  Kentucky. 
^        100.  The  Kansas  view;  the  question  of  the  fraudulent  character 
of  such  conveyances,  one  of  good  faith. 

Michigan. 

§  88.  The  Michigan  view;  fraud  in  conveyances  always 
rests  upon  intent;  a  dissenting?  opinion. — The  courts  of 
six  of  the  States  have,  while  not  concurring  in  their  reasons, 
committed  themselves  severally  to  the  support  of  convey- 
ances of  this  class.  They  are  upheld  in  Michigan,  upon 
the  theory  that  fraud  as  a  result  of  a  reserved  power  of 
sale  cannot  be  declared  except  as  resting  in  intent,  and  is 
therefore  to  be  considered  a  question  of  fraud  in  fact,  and 
not  of  fraud  in  law.  The  law  was  thus  announced  in  the 
cases  of  Oliver  v.  Euton^  and  Gay  v.  Bidwell,^  which  present 

1  7  Mich.  108  (1859).  2  7  Mich.  519. 

141 


§  88    FRAUDULENT  MORTGAGES  OF  MERCHANDISE. 

the  question  fairly  for  consideration.  In  the  former  case 
the  question  was  reserved  whether  power  allowed  to  the 
mort":afrer  of  a  stock  of  "roods,  to  sell  in  the  usual  course  of 
trade  and  control  the  proceeds,  renders  the  mortgage  void 
as  to  creditors,  irrespective  of  intent ;  which  was  answered 
in  the  negative,  sustaining  the  verdict  of  a  jury  in  favor  of 
the  conveyance.  The  burden  of  the  case  is  that  the  statute 
in  this  State,  (as  in  Indiana),  makes  the  question  of  fraud- 
ulent intent  a  question  of  fact  for  the  jury,  which  provision 
the  court  cordially  approves,  as  "undoubtedly  introduced 
to  create  or  settle  a  rule  of  law."  The  court  agrees  that 
"  the  law,  where  an  instrument  contains  illegal  provisions, 
and  such  as  are  not  reconcilable,  on  any  possible  hypoth- 
esis, with  an  honest  or  legal  intent,  declares  it  void  upon 
its  face,  because  no  evidence  could  change  its  character;  " 
but  the  case  at  bar  is  held  not  to  be  within  that  rule.  It 
is  apparently  assumed  that  fraud  cannot  be  declared  to 
pertain  to  such  conveyances  unless  the  intent  to  defraud  can 
be  clearly  imputed  to  the  parties. 

In  an  earlier  case,  the  Supreme  Court  of  this  State  had 
taken  broader  ground  than  this,  and  had  given  a  more 
restricted  construction  to  the  statute  referred  to.  Pierson  v. 
Manning^  was  a  case  of  a  general  assignment  for  creditors, 
attacked  in  a  court  of  law  for  alleged  fraud ;  and  upon  a 
question  reserved  as  to  its  validity,  the  Supreme  Court  de- 
clared it  void  by  reason  of  a  resulting  trust  for  the  grantor, 
appearing  by  legal  implication  from  the  provisions  of  the 
assignment.  The  statute  was  urged  upon  the  court,  as  re- 
quiring that  the  question  of  fraud  be  submitted  to  the  jury. 
But  the  court  said  that  this  would  be  "  carrying  that 
provision  of  the  statute  entirely  beyond  what  the  Legislature 
ever  intended,  or  it  will  legally  bear ;  it  is  not  to  be  presumed 
that  the  Legislature  intended,  by  this  simple  provision,  to 

1  2  Mich.  445  (1852). 

142 


VIEWS   OF   THE   AJMERICAN   MINORITY.  §    88 

make  such  a  radical  reform  as  to  turn  principles  of  law  into 
questions  of  fact,  nor  does  it  in  fact  or  inferentially  do  so." 
This  decision  is  not  referred  to  in  the  opinion  in  Oliver  v. 
Eaton . 

Gay  V.  Bidwell  arose  in  chancery;  the  power  of  sale  by 
the  mortgagers  appeared  by  plain  implication  on  the  face  of 
the  mortgage,  the  provision  being  that  they  should  not  "  sell 
and  dispose  of  said  goods  and  chattels  otherwise  than  in  the 
ordinary  course  of  their  usual  business;  "  and  the  court,  in 
its  own  view,  was  placed  face  to  face  with  the  question, 
*'  Were,  then,  the  facts  such  as  to  create  a  legal  fraud,  not- 
withstanding the  actual  good  faith  of  the  parties  ?  "  It  was 
thought  not,  because  it  is  a  cardinal  rule,  never  to  infer  a 
dishonest  meaning,  if  an  honest  one  is  possible.  The  statute, 
as  its  design  was  explained  in  Oliver  v.  Eaton,  was  held  to 
apply  to  the  case  as  fully  as  if  it  were  before  a  jury,  the  case 
being  considered  an  excellent  one  for  illustrating  the  statute. 
*'  How  can  any  one,"  asked  the  court, "  from  the  face  of  this 
mortgage,  and  without  reference  to  extraneous  facts,  draw 
any  conclusion  Avhatever,  concerning  either  its  intent  or  its 
bearing  upon  creditors  ?  It  would  certainly  be  valid  under 
any  circumstances  if  there  were  no  creditors.  It  does  not 
appear  from  the  mortgage  that  there  were  any.  It  would 
not  injure  other  creditors  if  they  were  abundantly  secured. 
It  does  not  show  they  were  not.  It  would  not  be  void  if 
they  had  authorized  it.  And  many  other  cases  might  be 
suggested,  showing  that,  without  proof  of  external  facts, 
there  could  be  no  conclusive  presumption  at  all.  And  of 
all  those  outside  facts,  the  jury  are  sole  arbiters  under  any 
theory . ' '  The  court  further  said  :  "  To  hold  that  a  merchant 
cannot  mortgage  his  goods  without  closing  his  doors,  would 
be  to  hold  that  no  mortorage  of  a  merchant's  stock  can  be 
made  at  all.  We  cannot  so  hold  until  the  statutes  declare  a 
new  rule. ' '  The  case  of  Pierson  v.  Manning  was  not  referred 
to  as  at  all  apposite  to  the  case,  except  by  one  dissenting 

143 


§  S9         FRAUDULENT  MORTGAGES  OF  MERCHANDISE. 

judge,  who  would  have  decided  the  case  otherwise  and  in  ac- 
cordance with  the  New  York  and  Ohio  authorities.  This  judge 
drew  the  distinction  between  fraud  resting  in  intent,  and  fraud 
shown  by  the  tendency  of  the  transaction,  in  these  words: 
"  There  are  two  kinds  of  fraud;  fraud  in  law  and  fraud  in 
fact.  "When  courts  say  an  instrument  is  fraudulent  on  its 
face,  or  in  law,  I  do  not  understand  them  to  mean  it  is  made 
Avith  a  corrupt  intent,  but  that  it  is  an  instrument  the  law 
will  not  sanction  or  give  effect  to,  as  to  third  persons,  on 
account  of  its  susceptibility  of  abuse,  and  the  great  danger 
of  such  contracts  beingused  for  dishonest  purposes.  Hence, 
in  many  cases,  the  law  has  shaped  and  given  form  to  con- 
tracts, on  which  form  their  effect  or  legality  is  made 
to  depend."  It  is  in  accordance  with  these  views  that,  in 
other  jurisdictions,  similar  conveyances  have  been  held  to 
disclose  a  tendency  so  potent  for  fraud,  as  to  furnish  all  the 
facts  necessary  for  an  adjudication  of  fraud,  and  to  dis- 
pense with  any  inquiry  by  the  jury  as  to  the  intent  of  the 
parties.  It  was,  however,  the  opinion  of  the  majority  of 
the  court  in  this  case,  that  "  no  court  has  given  any  satis- 
factory reason  why  such  a  provision  should  necessarily 
vitiate  a  chattel  mortgage,  although  it  is  undoubtedly  liable 
to  abuse." 

§  89.  Such  conveyances  iiniformlj'  sustained  in  Michi- 
gan. —  This  question  has  several  times  since  been  re-argued 
before  the  Supreme  Court  of  Michigan,  but  the  rulings  in 
these  cases  are  adhered  to.  In  People  v.  Bristol,^  it  was 
said  that  the  question  of  the  authority  left  in  the  mort- 
gager to  dispose  of  his  goods  in  the  usual  way  was  settled 
and  "not  open  to  controversy;  "  in  Wingler  v.  Sibley,^ 
such  conveyances  were  said  to  be  "  uniformly  held  valid  ;  " 
and  to  the  same  effect  is  Cadwell  v.  Pray.^  Other  and  fre- 
quent cases  show  the  execution  of  these  mortgages  to  be  a 

1  35  Mich.  28  (187C).  '-  35  Mich.  231.  ^  41  Id.  307. 

144 


VIEWS    OF   THE   AMERICAN   MINORITY.  §    90 

common  practice  in  Michigan.^  In  Leland  v.  Collvcr,^  the 
stock  of  goods  had,  subsequent  to  the  mortgage,  passed 
into  the  hands  of  several  successive  vendees,  each  of  whom, 
having  had  notice,  was  heki  to  be  a  trustee  as  to  the  mort- 
gaged property,  so  the  mortgagee  thus  traced  his  fund  into 
the  stock  of  goods  in  the  hands  of  the  last  vendee. 

Iowa. 

§  90,  Reserved  power  of  sale  immaterial  in  Iowa  ;  the 
common-law  rule  abolished  by  statutes. — The  rule 
adopted  by  the  Supreme  Court  of  Iowa,  in  reference  to  this 
class  of  cases,  is  unqualifiedly  opposed  to  the  doctrine  of 
Robinson  v.  Elliott.  The  courts  of  that  State  can  have  no 
independent  opinion  upon  the  question  of  fraud  involved, 
but  it  is  left  to  the  jury  to  be  determined  as  a  question  of 
fact,  apparently  with  reference  to  the  intent  of  the  parties. 
It  is,  however,  conceded  in  Iowa  that  this  rule  is  peculiar 
to  that  State,  and  is  based  upon  the  provisions  of  their 
statutes,  and  that  the  common-law  rule,  in  the  absence  of 
these  statutes,  would  be  otherwise.  Torbert  v.  Hay  den  ^ 
and  Hughes  v.  Cory*  are  the  leading  cases,  each  of  which 
presented  the  question  fairly.  Torbert  v.  Hayden  was  a 
mortgage  upon  a  stock  of  goods  to  secure  a  debt  running 
twelve  months,  the  mortgagers  continuing  their  usual  sales 
with  the  assent  of  the  mortgagee,  and  using  the  proceeds 
for  their  own  benefit;  and  the  trial  court  followed  the  New 
York  and  Ohio  cases,  charging  the  jury  that  if  these  facts 
were  found,  the  mortgage  was  fraudulent  and  void  as  to 
creditors.     Hughes  v.  Cory  was  a  similar  case  in  most  re- 

1  Cigar  Co.  v.  Foster,  36  Id.  368 ;  Robson  v.  Railroad,  37  Id.  70 ;  Willison 
V.  Desenberg,  41  Id.  156 ;  Bank  v.  Kent,  43  Id.  292 ;  Adams  v.  Niemann,  46 
Id.  135 ;  Keables  v.  Christie,  47  Id.  594 ;  Laing  v.  Perrott,  48  Id.  298 ;  Curtis 
V.  Wilcox,  49  Id.  425. 

2  34  Id.  418. 

3  11  Iowa,  435  (1861). 
*  20  Id.  399  (1866). 

10  145 


§  90    FRAUDULENT  MORTGAGES  OF  MERCHANDISE. 

spects,  the  power  of  sale  appearing  on  the  face  of  the 
mortgage;  and  the  trial  court  held  the  instrument  fraudu- 
lent and  void,  and  excluded  it  as  evidence.  The  Supreme 
Court  reversed  both  these  cases,  and  in  each  instance  gave 
elaborate  reasons  for  its  action.  It  was  said  that  the  views 
of  the  trial  court  "  harmonize  with  the  English  common- 
law  doctrine,  and  have  for  their  authority  quite  a  number 
of  American  decisions;  "  ^  and  that  "  such  an  instrument 
would,  by  the  English  courts,  be  deemed  fraudulent  at  com- 
mon law  and  under  13  Elizabeth,  because  the  morto:ager 

'  CO 

was  allowed  to  retain  possession  and  to  make  sales  from  the 
goods." -^ 

But  the  Iowa  statute  Avas  held  to  change  the  rules  of  law, 
and  to  lead  to  a  different  conclusion.  This  statute  de- 
clares that  possession  retained  under  a  chattel  mortgage 
shallnot  invalidate  it,  if  the  mortgage  shall  be  duly  executed, 
acknowledged  and  recorded;  the  legal  effect  of  which  is 
declared  to  be  equivalent  to  actual  delivery  of  the  property. 
This  statute  is  similar  to  those  of  Illinois,  Minnesota,  and 
other  States  ;  but  the  judicial  construction  of  it  in  Iowa  is 
far  different.  It  is  there  supposed  that  this  provision  of 
law  removes  all  the  dilBculties  which  attend  upon  posses- 
sion in  every  case,  so  that  even  possession  with  power  of 
disposition  loses  all  its  pernicious  features.  The  Ohio  cases 
which  take  the  contrary  view  are  distinguished  by  the  cir- 
cumstance that  the  Ohio  statute  does  not  go  so  far  as  to 
make  registration  of  the  mortgage  equivalent  to  an  actual 
delivery  of  the  j^roperty  ;  ' '  hence  the  legal  effect  of  pos- 
session by  the  mortgager  there,  so  far  as  the  rights  of  third 
persons  are  concerned,  must  be  somewhat  different  from 
what  it  is  here."  ^  The  Ohio  cases  are  commended  as 
probably  correct  expositions  of  the  results  flowing  from 
such  conveyances  in  Ohio ;   but  like  results  could  not  follow 

1  Lowe,  C.  J.,  11  Iowa,  at  p.  439.  ^  piUon,  J„  20  Iowa,  at  p.  401. 

•^  11  Iowa,  at  p.  442. 
14G 


VIEWS    OF   THE   AMERICAN   MINORITY.  §    90 

in  Iowa.  Lowe,  C.  J.,  said:  "It  is  true  that  if  the  mort- 
gager is  permitted  to  deal  with  the  property  as  his  own,  the 
mortgage  security  is  not  altogether  safe  or  certain ;  much 
is  necessarily  left  to  the  honesty  and  good  faith  of  the 
debtor  ;  but  if  this  confidence  is  abused,  it  is  the  misfortune 
of  the  mortgagee,  and  furnishes  no  ground  of  complaint  to 
other  creditors.  They  are  no  worse  off  than  they  would 
have  been  if  no  mortgage  had  ever  been  executed.  To 
them  it  can  make  no  difference  whether  the  mortgaged 
property  is  in  the  possession  of  the  mortgager  or  mort- 
gagee. In  neither  event  is  the  property  altogether  beyond 
their  reach  or  control,  as  it  is  stated  to  be  under  the  Ohio 
laws.  It  surely  would  be  competent  for  the  creditor,  before 
forfeiture,  to  pay  the  mortgage  debt,  and  then  seize."  ^ 
Dillon,  J.,  in  stating  the  doctrine  of  Torbert  v.  Hayden  to 
be  the  settled  law  in  Iowa,  elaborated  these  arguments, 
with  a  view  of  showing  what  remedies  creditors  might  have, 
despite  the  disputed  mortgage.^  He  furthermore  drew  the 
distinction  between  fraud  in  law  and  fraud  in  fact,  and 
while  he  held  that  fraud  is  always,  after  the  facts  are  proved, 
an  inference  of  law,  and  that  the  jury  is,  under  the  direc- 
tion of  the  court,  bound  to  find  it,  he  treated  the  mortgage 
under  consideration  as  not  possibly  fraudulent  in  fact,  and 
sustained  it  as  valid  under  the  Iowa  statute.^  It  is  inti- 
mated, however,  that  a  fraudulent  intent,  or  a  reservation 
to  the  use  of  the  debtor,  might  still  suffice  to  invalidate 
such  a  conveyance,  even  though  well  registered.  But  the 
control  of  the  mortgager  of  his  goods,  in  the  usual  course 
of  trade,  does  not  appear  to  the  learned  court,  in  any  re- 
spect, in  the  light  of  a  reservation  to  his  own  use. 

The  rule  thus  adopted  has  been  adhered  to  in  Iowa,  and  the 
cases  announcing  it  have  been  cited  as  authorities  indis- 
criminately incases  of  retained  possession  under  various cir- 

J  p.  443.  »  20  Iowa,  p.  407-8.  »  20  Iowa,  at  p.  405. 

147 


§01    FRAUDULENT  MORTGAGES  OF  MERCHANDISE. 

cumstances.  Torbert  v.  Haydenwas  declared  to  furnish  the 
law  for  the  cases  of  Campbell  v.  Leonard^  and  Wilhelnii  v. 
Leonard,^  which  apparently  involved  the  question  of  retained 
possession  only,  without  power  of  disposition  ;  for  the  case 
of  Jessup  V.  Bridge,^  which  w^as  a  mortgage  upon  a  railroad, 
with  its  rolling  stock  and  accretions,  as  to  which  the  neces- 
sities of  commerce  have  established  a  peculiar  doctrine  ; 
and  also  for  the  case  of  Adler  v.  Claflin,*  which  was  a  mort- 
gage upon  a  stock  of  goods,  all  the  proceeds  of  sales,  after 
paying  expenses,  to  be  paid  over  to  the  mortgagees. 

§  91.  Such  conveyances  common  in  Iowa,  and  beyond 
criticism;  Stare  decisis. — From  the  cases  of  Doane  v. 
Garretson,^  Allen  v.  McCalla,^  Stephens  v.  Pence, ^  Phillips 
V.  Both ,^  and  Clark  v.  Hyman,^it  appears  that  mortgages 
upon  stocks  of  goods  in  trade  are  of  frequent  occurrence  in 
Iowa.  In  the  last  named  case,  Day,  J.,  recurred  to  the 
discussion  and  decision  of  the  earlier  cases,  in  the  following 
words : 

"  It  is  claimed,  however,  that  Hughes  v.  Cory  is  not  only 
opposed  to  the  weight  of  authority,  but  wrong  in  principle, 
and  we  are  asked  to  overrule  it.  That  case  was  determined  in 
1866.  It  received  the  most  careful  and  deliberate  consid- 
eration. It  discusses  the  rule  at  common  law,  and  in  many 
of  the  States  of  our  Union,  and  show^s  its  inapplicability 
to  the  peculiar  provisions  of  our  statute.  For  fourteen 
years,  this  decision  has  been  regarded  as  an  authoritative 
settlement  of  the  questions  involved  in  it.  We  ought  not 
now  to  be  expected  to  enter  upon  a  re-examination  and  re- 
consideration of  these  questions. 

1  11  Iowa,  489.  ^  L'4  Id.  3J1. 

2  18  Id.  330.  B  25  Id.  465. 
»  11  7c?.  572.  7  b&Id.2f>l. 
*  n  Id.  89.  8  58  Id,  499. 

8  55  Id.  14:  39  Am.  Rep.  160  (1880). 
148 


VIEWS    OF   THE   AMERICAN   MINORITY.  §    91 

*< '  The  rule  stare  decisis  is  one  of  the  most  sacred  in  the 
law.'  It  is  even-of  '  more  importance  that  a  rule  should  be 
fixed  and  stable,  than  that  it  should  be  strictly  just.'  If 
we  should  disregard  the  maxim  stare  decisis,  '  like  the  ever 
returning  but  never  ending  labors  of  the  fabled  Sisyphus, 
we  would,  in  each  recurring  case,  have  to  enter  upon  its  ex- 
amination and  decision  as  if  all  were  new,  without  any  aid 
from  the  experience  of  the  past,  or  the  benefit  of  any  estab- 
lished principle  or  settled  law.  Each  case,  with  its  decision 
thus  limited,  as  laiv,  to  itself  alone,  would  in  turn  pass 
away  and  be  forgotten,  leaving  behind  it  no  record  of  prin- 
ciple established,  or  light  to  guide,  or  rule  to  govern  the 
future.' 1 

"If  it  be  true  that  the  rapidly  increasing  commercial  in- 
terests of  the  State  require  that  a  merchant  desiring  to  se- 
cure his  creditor  upon  his  stock  of  goods  shall  surrender 
the  goods  and  quit  business,  rather  than  that  he  shall  be 
allowed  to  continue  business  in  the  usual  way,  the  most 
cogent  and  controlling  reasons  require  that  such  a  rule  of 
law  shall  be  declared  by  the  Legislature,  and  not  by  this 
court."  ^ 

From  these  remarks,  the  nature  and  character  of  the  ar- 
guments addressed  to  the  court  may  be  inferred.  The  case 
presented  was  a  *'  mortgage  of  a  stock  of  merchandise,  ac- 
companied with  an  arrangement  for  sales  in  the  usual  course 
of  trade." 

Such  mortgages  are  held  valid  as  to  accretions  to  the 
stock  of  goods  made  by  purchase  ;  ^  but  it  is  doubted  by 
the  courts  whether  the  principle  should  be  extended  to  cover 
crops  not  planted.* 

1  Ram's  Legal  Judgt.,  Am.  Ed.  pp.  234,  199,  416. 

2  55  Iowa,  at  p.  20. 

^  Scharfenburg  v.  Bishop,  35  Iowa,  60 ;  Stephens  v.  Pence,  56  Id.  257. 
*  Muir  V.  Blake,  57  Iowa,  662 ;  Pennington  v.  Jones,  57  Id.  37. 

149 


§    92         FKAUDULENT    ^lOUTGAGES    OF    MERCHANDISE. 

§  92.   The   reasons    for    the    Iowa    rule    examined. — 

Elaborate  as  arc  the  explanations  made  in  Hughes  v.  Cory 
and  Torbert  v.  Ilaydcn,  of  the  reasons  for  sustaining  such 
conveyances,  they  are  3'et  disappointing  in  several  respects. 
First,  no  adequate  attention  is  given  to  the  circumstance 
that  the  control  of  the  mortgager  over  the  mortgaged  prop- 
erty is  practically  unlimited  while  it  continues,  so  as  to  en- 
able him,  if  he  chooses,  to  secrete  or  dispose  of  it ;  or  to  the 
circumstance  that  in  every  such  case,  where  the  proceeds  are 
not  to  be  paid  over  to  the  mortgagee,  the  continuance  of 
the  business  is  in  reality  a  continuance  for  the  benefit 
and  in  the  interest  of  the  debtor  himself.  Second,  the 
ability  of  another  creditor  to  levy  on  the  surplus  of  the 
the  goods,  outside  of  the  portion  covered  by  the  mortgage, 
which  the  learned  court  considered  conclusive  as  to  his  com- 
plaint, is  in  reality  the  ability  only  to  levy  on  so  much  of 
the  portion  not  covered  as  the  honesty  of  the  debtor  will 
allow  to  remain  on  hand,  and  not  secretly  disposed  of;  and 
the  opinions  of  the  learned  court  do  not  appear  to  consider 
the  possible  convenience  for  dishonesty  thus  affoi'ded. 
The  ready  opportunity  which  the  Iowa  practice  offers  for 
the  appointment  of  a  receiver  will  secure  to  the  complain- 
ing creditor  only  such  portion  as  is  left,  after  the  debtor 
has  worked  his  pleasure  with  the  goods.  It  is  under  cover 
of  a  mortgage  which  is  upheld  as  valid,  that  a  dishonest  debtor 
may  thus  work ;  though  these  possible  consequences  were 
involved  in  the  transaction  from  the  beginning.  Third,  the 
provision  of  the  Iowa  statute,  that  registration  of  a  mort- 
gage  shall  "  have  the  same  effect  as  though  it  had  been 

DO  O 

accompanied  by  the  actual  delivery  of  the  property,"  while 
it  may  well  establish  a  statutory  prima  facie  validity, 
can  scarcely  be  supposed  to  have  the  effect  of  eliminating 
all  possibilities  of  fraudulent  conduct.  If  it  were  so  in- 
tended, this  would  be  a  mere  fiction,  wdiich  a  court  might 
readily  expose.  Even  in  case  of  an  actual  manual  delivery, 
150 


VIEWS    OF    THE    AMERICAN    MINORITY.  §    93 

the  efiicacy  of  such  delivery  would  he  completely  nullified 
by  allowing  the  mortgager  to  resume  the  potential  control 
and  disposition  of  the  property;  and  it  Avould  seem  that  any 
court  might  well  tell  a  jury  that  such  a  subterfuge  would  be 
essentially  fraudulent,  whether  so  intended  or  not. 

§  93.   The  Iowa  view  of  other  frauds  in  conveyances. — 

In  its  treatment  of  the  question  of  fraud  as  presented  in 
some  other  aspects  in  conveyances,  the  jurisprudence  of 
Iowa  does  not  seem  i)cculiar.  In  Macomber  v.  Pcck,^  it  is 
held  that  if  a  vendor  of  land,  by  a  secret  arrangement  with 
the  vendee,  reserve  to  himself  the  use  of  the  land  for  a  time 
without  rent,  such  agreement  renders  the  conveyance 
"  fraudulent  in  law,  irrespective  of  the  intention  with  which 
it  was  executed."  Lukins  v.  Aird^  is  cited  as  a  direct  au- 
thority for  this  ruling  ;  in  which  case  the  Su}n-eme  Court  of 
the  United  States  held  the  fraud  to  be  inherent  in  the  arrann-e- 
ment,  as  a  conclusion  of  law,  which  the  court  was  as  much 
bound  to  pronounce  as  if  a  fraudulent  intent  were  proved. 
But  when,  in  Jordan  v.  Lendrum,^a  case  was  presented  of  a 
conveyance  of  chattels,  with  the  use  allowed  to  the  grantor 
of  property  consumable  in  the  use,  and  Lukins  v.  Aird  was 
cited  as  an  authority  in  point  on  the  subject  of  fraudulent 
reservation,  it  became  pertinent  to  offer  explanations  as 
to  the  distinction  between  Macomber  v.  Peck  and  the  class 
of  cases  represented  by  Hughes  v.  Cory,  which  explana- 
tions further  illustrate  the  peculiarities  of  the  Iowa  law. 
Referring  again  to  the  provisions  of  the  Iowa  statute  which 
give  to  the  registration  of  any  bill  of  sale  or  mortgage  of 
personal  property  "  the  same  effect  as  though  it  had  been 
accompanied  by  the  actual  delivery  of  the  property  sold  or 
mortgaged,"  the  court  said  :  "  It  could  not  have  been  the 
purpose  of  these  sections  to  simply  authorize  the  vendor  to 
retain  the  naked  possession  of  the  property  Avithout  any 

1  39  Iowa,  351  (1874).  ^  G  Wall.  78.  s  55  lowa,  478  (1881). 

151 


§    1>3  FRAUDULENT    MOKTGAGES    OF    JlEKC'llANUlSE. 

enjoyment  of  it.  It  is  not  the  policy  of  the  law  to  place 
property  in  such  a  situation  that  it  cannot  be  beneficial  or 
useful.  If  the  vendor  has  received  an  actual  consideration 
for  the  property  sold,  it  can  be  no  disadvantage  to  creditors 
that  he  is  allowed  to  remain  in  possession  of  tiie  property, 
exercise  acts  of  ownership  and  control  over  it,  and  to  use 
and  dispose  of  it,  or  convert  it  to  his  own  use.  Such  con- 
trol and  use  only  better  the  financial  condition  of  the  ven- 
dor, render  him  more  able  to  pay  his  debts,  and  thus  benefit 
rather  than  injure  his  creditors.  If  it  should  be  made 
2')crrt  of  the  consideration  of  tlie  sale  that  the  vendor  should 
retain  the  possession  and  use  of  the  property  sold,  this 
might  enable  the  vendor  to  place  part  of  the  consideration 
received  beyond  the  reach  of  his  creditors,  and  thus  perpe- 
trate a  fraud  upon  them,  if  the  transaction  should  be  sus- 
tained.    This  is  the  doctrine  of  Macomber  v.  Peck." 

Two  features  are  noticeable  in  these  explanations.  One 
is  the  distinction  that  is  taken  between  an  agreement  to 
allow  the  vendor  the  use  and  control  of  the  property,  which 
is  made  as  a  part  of  the  consideration  of  the  transaction, 
and  a  similar  agreement,  wdiich  is  made  either  expressly  or 
tacitly,  after  the  main  transaction,  but  in  connection  with 
it;  as  to  which,  it  seems  somewhat  puzzling  to  understand 
why  the  subsequent  agreement  should  be  sustained  in  Jor- 
dan V.  Lendrum,  and  the  contemporaneous  agreement  should 
be  condemned  in  Macomber  v.  Peck,  when  the  result  in 
each  case  is  substantially  the  same  as  to  the  rights  of  the 
complaining  creditor.  The  other  feature  is,  the  view  that 
the  use  and  control  of  property  by  a  vendor  or  mortgager 
cannot  possibly  result  in  any  injury  or  disadvantage  to 
creditors.  It  has  not  generally  been  supposed  that  the  in- 
jury to  creditors  was  inherent  in  the  simple  control  of  the 
property  of  the  debtor.  Undoubtedly,  an  increase  of  assets 
in  the  debtor  may  enure  to  the  benefit  of  the  creditor;  but 
this  benefit  can  be  secured  to  him  only  by  allowing  him  to 
152 


VIEWS    OF    THE    AMERICAN   MINORITY.  §    94 

treat  the  additional  assets  as  the  property  of  his  debtor. 
The  injury  which  he  experiences  results  from  depriving  him 
of  these  assets,  by  allowing  a  mortgagee  to  say,  "  This 
property  belongs  to  your  debtor  only  in  appearance;  in 
fact  and  in  law  it  belongs  to  me."  It  is  the  assertion  of  a 
right  by  the  mortgagee,  antagonistic  to  the  right  of  prop- 
erty in  the  debtor,  which  operates  injuriously  to  the  general 
creditor.  These  views,  in  common  speech,  crystallize  into 
the  statement  that  the  conveyance,  or  the  transaction, 
is  void  because  fraudulent  as  to  creditors.  In  physics,  as  a 
result  of  an  accidental  breach  of  the  laws  of  gravitation,  it 
is  said  that  a  man  is  seriously  injured  by  falling  from  a 
house-top ;  and  it  is  but  a  play  upon  words  to  say  that  it  is 
not  the  fall,  but  the  too  sudden  stoppage,  that  causes  the 
injury.  And  in  Jurisprudence,  the  doctrine  of  estoppel  by 
conduct  is  based  nominally  upon  the  injury  resulting  to  some 
person  who  is  affected  by  the  conduct ;  but  the  injury  does 
not  in  fact  result  from  the  conduct  alone.  Injury  would  re- 
sult from  allowing  an  act  to  be  done  inconsistent  with  the 
previous  conduct  on  which  the  party  relied ;  and  to  avoid 
this  injury  the  law  prevents  the  performance  of  the  incon- 
sistent act,  or  if  performed,  treats  it  as  null  and  void  ;  for 
to  give  it  effect  would  operate  as  a  fraud.  In  fact,  the 
principle  of  fraud  inherent  in  mortgages  under  which  an 
inconsistent  power  of  disposition  is  reserved,  might  well  be 
called  as  it  has  sometimes  been,  a  variety  of  estoppel. 
Estoppel  and  fraud  are  frequently  spoken  of  as  terms  de- 
scribing substantially  the  same  class  of  cases;  and  in  the 
class  of  conveyances  referred  to,  the  intent  of  the  parties 
would  be  wholly  immaterial  in  considering  the  question  of 
Estoppel,  and  it  would  seem,  should  be  equally  so  if  the 
question  considered  be  that  of  Fraud. 

Massachusetts  . 

§  94.    Reserved    power    of    sale    merely    a    badge    of 
fraud  in  Massachusetts. — In  a  recent  case  in  this  State, 

153 


§  i'O    FKAUDULEXT  MORTGAGES  OF  MERCHANDISE. 

Fletcher  v.  Powers/  where  the  question  is  sharply  presented 
by  the  power  to  the  mortgager,  reserved  in  the  mortgage,  to 
sell  the  goods  in  the  regular  course  of  his  trade,  it  was  said  by 
the  Supreme  Judicial  Court  to  be  no  longer  an  open  ques- 
tion, "  it  having  been  repeatedly  held  that  such  a  power 
given  to  the  mortgager  does  not  per  se  avoid  the  mortgage, 
but  is  at  most  only  evidence  of  a  fraudulent  purpose,  to  be 
submitted  to  the  jury."  This  view  seems  to  have  been 
advisedly  adopted,  though  without  as  full  an  expression  of 
the  reasons  for  its  adoption  as  has  been  made  by  other 
courts. 

§  95.  Earlier  cases  iiiharmoiiioiis . — The  earlier  cases 
in  this  State  on  the  subject  of  fraud  in  conveyances  were 
not  entirely  harmonious.  In  Harris  v.  Sumner,^  where  a 
reservation  for  the  benefit  of  a  grantor  appeared  on  the 
face  of  an  instrument,  and  counsel  contended  that  *'  it  should 
have  been  left  to  the  jury  to  decide  upon  the  whole 
matter  whether  the  conveyance  were  fraudulent  or  not," 
the  court  dissented,  saying,  "  Where  the  defect  is  apparent 
upon  the  deed  itself,  the  effect  of  it  becomes  a  question  of 
law ;  it  would  be  worse  than  useless  to  submit  it  to  the  jury 
to  say,  upon  such  evidence,  whether  it  should  be  void 
against  creditors  or  not,  when  if  they  should  happen  to 
decide  ajrainst  the  leo;al  effect  of  the  instrument,  it  would 
be  the  duty  of  the  court  to  set  aside  the  verdict."  In 
Johnson  v.  Whitwell,^  a  power  of  revocation  agreed  upon 
in  connection  with  a  deed  of  land,  was  held  to  vitiate  it ; 
and  it  was  said,  "  altiiough  no  moral  fraud  was  intended, 
yet  it  w^as  a  legal  fraud . "  In  Foster  v.  Manufacturing  Co.  ,* 
where  the  mortgage  stipulated  that  the  grantors  should 
"  remain  in  possession  of  all  the  property,  and  sell  and 
dispose  of  all  the  personal  property  except  machinery,  ac- 

'  131  Mass.  333  (1881).  »  7  Pick.  71  (1828). 

2  2  Pick.  129  (1824).  *  12  Id.  451  (1832). 

154 


VIEWS    OF    THE    AMEIIICAX    MIXOIUTV.  §    1)5 

cording  to  the  usual  course  of  their  business,"  Shaw,C.  J., 
said  :  "  The  first  obvious  remark  is,  that  this  assignment,  as 
to  the  personal  estate,  was  inoperative  and  void,  against 
any  creditor  who  should  have  attached  before  the  trustees 
took  possession.  The  stipulation  that  the  vendors  should 
remain  in  possession  and  have  the  use  of  the  property 
would  have  rendered  it  void  as  against  creditors."  The 
case  was,  however,  saved  to  the  mortgagees  by  their  having 
taken  possession  of  the  property  before  the  adverse  proceed- 
ing's were  commenced. 

In  the  cases  of  Allen  v.  Smith  ^  and  Macomber  v.  Parker,^ 
which  involved  bricks  divided  between  joint  owners ,  the  maker 
of  them  being  left  in  possession  with  power  to  sell,  it  appeared 
that  he  acted  merely  as  the  agent  of  the  other  party,  who  was 
to  have  all  the  benefit  of  sales  made ;  and  this  circumstance 
controlled  the  decision  in  each  case.  Shutleff  v. Willard ^  and 
Robbins  v.  Parker  *  involved  mortgages  upon  hay,  grain 
and  farming  produce,  consumable  in  use,  and  part  of  which 
was  consumed  by  the  mortgager  in  each  case.  In  Robbins 
V.  Parker,  this  was  held  to  make  the  transaction  fraudulent 
as  to  creditors,  in  accordance  with  the  Tennessee  case  of 
Sommerville  v.  Horton  ;  ^  the  court  carefully  making  the 
distinction,  that  it  was  not  the  retention  of  possession  alone, 
even  of  articles  consumable  in  the  use,  but  it  was  that 
possession  and  use  which  inplied  the  consumption  of 
perishable  articles,  which  was  the  vicious  feature  of  the 
transaction.  In  Shurtleff  v.  Willard,  this  principle  was 
assented  to,  but  not  applied  directly  by  the  court ;  the  facts 
referred  to  were  simply  evidence  to  go  to  a  jury.  Codman 
V.  Freeman,^  which  is  often  referred  to  as  an  authority 
in  this  connection,  involved  a  mortgage  on  household 
furniture,    which  was    certainly   not   perishable  property ; 

1  10  Mass.  308  (1813),  *  3  Mete.  117  (1841.) 

2  14  Pick.  497  (1833).  &  4  Yerg.  540;  26  Am.  Dec.  242. 
»  19  Pick.  202  (1837.)  «  3  Cush.  306. 

155 


§  96    FRAUDULENT  MORTGAGES  OF  MERCHANDISE. 

and  the  onl}^  sales  allowed  under  it  were  by  way  of  exchange 
of  furniture,  the  new  to  be  substituted  for  the  old  under 
the  mortgage ;  and  this  was  held  valid  as  to  the  property 
actually  covered  by  the  mortgage  at  its  date,  which  was  the 
onl}''  pro])erty  involved. 

In  two  cases,  involving  a  general  assignment  of  real  and 
personal  property,  w^hich  was  left  in  the  possession  of  the 
assignor  with  the  stipulation  that  he  should  "  commit  no 
waste  thereon,"  it  was  held  that  possession  under  these  cir- 
cumstances did  not  invalidate  the  assignment.^ 

§  96.  The  doctrine  and  the  practice  settled  in  Massa- 
chusetts.—  The  question  as  to  stocks  of  merchandise 
first  came  fairly  before  the  court  in  Briggs  v.  Parkman,"^  in 
which  it  was  held  that  an  ao;reement  under  a  chattel  mortfjase 
on  a  stock  of  goods  in  trade,  that  the  mortgager  should  keep 
possession  and  continue  to  make  sales  in  the  ordinary  course 
of  business,  applj^ing  the  proceeds  to  his  own  use,  was  not 
fraudulent  in  law ;  that  while  it  tended  to  prove  a  fraudulent 
intent,  it  might  be  explained  consistently  with  fair  dealing; 
and  that  if  explanations  of  good  intent  were  offered,  they 
should  be  received  and  credited.  Though  a  chancery  case,  in 
which  all  questions  involved  were  to  be  tried  by  the  court, 
and  in  which  parties  agreed  that  the  court  might  draw  any 
inferences  from  the  facts  which  a  jury  might  draw,  the 
rule  w^as  applied  that  possession  in  such  cases  is  only 
presumptive  evidence  of  fraud,  which  should  be  sub- 
mitted- to  a  jury.  Then  considering  the  case  as  a  jury 
would  do,  in  the  light  of  the  intent  of  the  parties,  the  court, 
in  view  of  the  fact  that  the  mortorajxer  had  aofreed  that 
"  he  would  not  make  any  large  sales,"  found  that  there  was 
no  intent  to  defraud.  Thus  the  decision  was  rested  wholly 
upon  the  question   of  a  fraudulent  intent.     It  should  be 

»  Baxter  v.  Wheeler,  9  Pick.  21 ;  Russell  v.  Woodward,  10  Id.  408. 
»  2  Met.  258 ;  37  Am.  Dec.  89.  (1841). 

156 


VIEWS    OF    THE    AMERICAN    MINORITY.  §    96 

noted  that  the  rule  applying  to  cases  of  mere  retention  of 
possession  was  taken  as  the  rule  for  this  case,  and  that  no 
distinction  Avas  observed  as  to  the  element  of  the  reserved 
power  of  sale,  which  was  considered  to  have  no  other  effect 
than  mere  possession,  except,  possibly,  to  "  raise  a  stronger 
presumption  of  fraud." 

This  case  was  ai:)proved  and  affirmed  in  Jones  v.  Iluo-jre- 
ford,^  where  the  contract  was  that  the  mortgager  should 
apply  the  proceeds  of  sales,  first  to  the  purchase  and  sub- 
stitution of  new  goods,  and  afterwards  to  the  payment  of 
the  mortgage  debt.  It  was  announced  as  the  Massachu- 
setts doctrine  that  only  "  fraud  in  fact "  or  in  the  intent  of 
the  parties  will  suffice  to  vitiate  such  a  transaction.  And 
the  rule  being  adhered  to  that  such  a  contract  as  that  in 
Briggs  V.  Parkman  is  not  fraudulent  pe7'  se,  but  furnishes 
only  presumptive  evidence,  which  should  be  passed  on  by  a 
jury,  no  difference  was  seen  between  the  two  cases  as  to  the 
fact  that  in  the  later  case,  the  mortgagee  did  in  reality 
secure  the  proceeds  of  the  sales. 

The  question  arose  again  in  Barnard  v.  Eaton,-  where  the 
mortgage  was  much  like  that  in  3  Mete,  but  it  was  treated 
lightly  in  the  Supreme  Judicial  Court  and  passed  by  with- 
out much  comment. 

Again,  in  Cobb  v.  Farr,^  the  question  arose  under  a  mort- 
gage providing  that  the  proceeds  of  sales  should  be  applied 
to  the  purchase  and  substitution  of  new  goods ;  and  the 
mortgage  was  sustained  without  comment,  the  court  being 
evidently  satisfied  with  the  rulings  announced  in  Briggs  v. 
Parkman  and  Jones  v.  Huggeford. 

And  in  Rowley  v.  Rice,^  where  a  mortgage  was  presented 
which  was  expressed  to  cover  all  such  goods  as  the  mort- 
gager might  put  in  to  supply  the  place  of  those  he  should 
sell,  the  court  confined  its  attention  to  the  question  of  the 

1  3  Met.  515.  3  IG  Gray,  597  (1860). 

2  2  Cush.  294  (1848).  *  11  Met.  333. 

157 


§    1:)7  FRAUDULENT    MORTGAGES    OF    MERCIIAXDI.SE. 

validity  of  the  mortgage  as  covering  tlie  after  acquired 
property  ;  tlie  reservation  of  a  power  of  sale  was  not  con- 
.sidercd,  nor  was  the  distinguishing  circumstance  that  the 
mortgagee  had  taken  possession  of  the  goods  before  the  con- 
troversy arose. 

From  the  frequency  of  cases  in  the  Massachusetts  courts, 
in  which  mortgages  have  been  given  on  stocks  of  goods  in 
trade,  the  practice  of  making  such  contracts  seems  to  be 
quite  common.  In  several  of  the  cases,  the  feature  of  the 
mortgager's  powder  of  sale  received  no  attention.^  In  one 
case  the  mortgage  stipulated  against  the  exercise  of  such  a 
power  by  the  mortgager.  The  mortgagee  testified:  "I 
said  he  might  0:0  on  and  do  business  as  usual  for  all  me." 
This  was  simply  evidence  for  the  jury,  under  the  Massachu- 
setts rule.  The  trial  court  properly  declined  to  direct  a 
verdict.- 

It  is  made  by  statute,  in  Massachusetts,  a  criminal  offence 
for  a  mortgager  of  personal  property  to  sell  it  without  the 
written  consent  of  the  mortgagee.^ 

And  as  to  a  pledge  of  personal  property  in  this  State,  it 
may  be  noted  that  a  pledgee  leaving  the  property  in  the 
hands  of  the  pledger  would  lose  his  security.* 

Maine. 

§  97.  The  Maine  view  ;  the  question  one  as  to  evidence 
merely. — In  Maine  the  question  has  not  been  thoroughly 
discussed.  The  earlier  cases  of  Melody  v.  Chandler^  and 
Abbott  V.  Goodwin*^  are  not  in  point,  though  mortgages  on 

'  Flood  V.  Clemence,  106  Mass.  299;  Folsom  r.  Clemence,  111  Id.  273; 
Pratt  w.  Maynard,  116  Id.  388. 

•■'  Sleeper  v.  Chapman,  121  Id.  404. 

3  Commonwealth  v.  Damon,  105  Id.  580;  Commonwealth  v.  Slrangford, 
112  W.  289. 

^  Thompson  v.  Dolliver,  132  Mass,  103. 

5  12  Me.  282. 

6  20  Me.  408 

158 


VIEWS    OF    THE    AMEKICAX    MINOKITY.  §    97 

stocks  of  goods  in  trade,  because  in  these  cases,  the  mort- 
gager, though  left  in  possession,  was  there  only  as  the  agent 
of  the  mortijao-ees,  to  whose  use  and  benefit  all  the  proceeds 
of  sales  were  expressly  to  be  applied.  In  Melody  v.  Chand- 
ler, it  was  said:  "  He  is  to  be  considered  as  the  agent  or 
servant  of  the  plaintiff,  employed  for  a  specific  purpose, 
and  invested  with  no  other  power  than  what  is  requisite  to 
enable  him  to  execute  his  agency.  His  possession  of  the 
chattels  entrusted  to  him  is  the  possession  of  his  principal." 
And  in  Abbott  v.  Goodwin,  it  was  said  :  "  They  secured  to 
themselves  the  power  to  control  the  proceeds  for  the  same 
purposes  for  which  the  goods  were  mortgaged."  To  the 
same  effect  was  Cutter  v.  Copeland.'  It  is,  therefore,  in- 
accurate to  cite  .these  cases  as  authorities  on  the  question  of 
a  power  of  sale  reserved  to  the  mortgager  in  his  own  right, 
or  in  his  discretion.  Abbott  z;.  Goodwin  is  recognized  as 
autliority  for  cases  where  the  mortgagers  under  such  a  con- 
veyance are  made  the  agents  of  the  mortgagees,  to  sell  for 
their  benefit  alone,  in  the  recent  case  of  Allen  v.  Goodnow; 
which  case,  being  a  controversy  between  the  parties  them- 
selves, did  not  present  the  question  under  discussion  in  any 
form.  Nor  can  Stedman  v.  Vickery^  be  properly  cited  as 
an  authority  in  this  connection,  for  the  reason  that  it  was  a 
case  arising  under  a  trustee's  disclosure,  in  which  the  ques- 
tion of  fraud  would  be  pretermitted  by  the  principle  that 
the  contract  was  good  between  the  j^arties. 

Googinsv.  Gilmore*  presents  the  point,  though  not  at  all  de- 
cisive of  it  as  a  question  of  substantive  law,  for  it  decides 
merely  that  the  courts  of  Maine  will  not  declare  any  such  con- 
veyance fraudulent  in  itself,  or  treat  it  is  as  conclusively  so, 
but  will,  on  the  theory  of  a  mere  presumption,  leave  the 
question  of  fraud  to  the  jury.  There  the  mortgage  which 
allowed  the  mortgager   to   remain   in  possession,  with  an 

>  18  Me.  127.  3  42  Me.  132. 

2  71  Me.  420  (1880).  *  47  Me.  9  (1859). 

159 


§  07    FRAUDULENT  MORTGAGES  OF  MERCHANDISE. 

understanding  that  he  was  to  go  on  as  before  in  control  of  the 
goods  and  his  business,  was  supported,  the  jury  having  sus- 
tained it  on  the  question  of  fraud  in  fact.  The  courts  fol- 
lowed tlie  uniform  practice  in  that  State  of  submitting  the 
(jucstion  of  fraud  to  the  jury,  a  practice  which  the  earliest 
cases  show  was  adopted  implicitly  from  the  parent  State  of 
Massachusetts.  How  slight  attention  has  been  given  in 
Maine  to  the  vital  question  in  these  cases  is  evident  from 
the  curious  cases  of  Chapin  v.  Cram  ^  and  Partridge  v.  White. - 
The  first  named  case  was  a  contest  between  two  successive 
mortgagees  of  a  trader's  stock  of  goods,  over  goods  valued 
at  $25,  added  to  the  stock  between  the  dates  of  the  two 
mortirages,  and  as  to  which  the  later  mortgagee  prevailed 
over  the  prior.  In  the  last  named  case,  in  which  also  the 
parties  were  successive  mortgagees  of  a  stock  of  goods, 
the  defendant,  who  was  the  prior  mortgagee  by  several 
years,  lost  his  case  because  he  failed  to  identify  any  of  the 
goods  then  on  hand,  as  in  the  stock  when  it  was  mortgaged 
to  him. 

Sawyer  v.  PcnnelP  was  a  controversy  between  a  mort- 
ixasee  under  a  mortgage  upon  a  stock  of  goods,  and  an 
attaching  creditor;  and  the  latter  prevailed,  the  question 
involved  being  one  of  notice  to  him  of  the  mortgage,  "  there 
being  no  fraud  alleged  on  either  side."  The  report  does 
not  disclose  the  facts  as  to  the  mortgager's  power  of  sale. 
In  Brown  v.  Thompson,*  which  was  a  similar  controversy, 
and  in  which  a  discretionary  power  of  sale  might  be  fairly 
inferred,  the  validity  of  the  mortgage  is  evidently  taken  for 
granted,  though  the  question  is  not  discussed  in  any  manner. 
Wolfe  V.  Dorr^  involved  a  similar  controversy,  in  which  it 
appeared  the  mortgager  had  made  sales  of  the  goods ;  but 
the  question  of  fraud  in  this  respect    was  not  considered, 

1  40  Me.  561.  *  59  Me.  372  (1871). 

2  59  Me.  564.  6  24  Me.  104. 

3  19  Me.  167. 

160 


VIEWS    OF    THE    AMERICAN    MINORITY.  §    98 

and  the  few  remarks  made  upon  the  subject  of  fraud  apply 
to  a  supposed  fraudulent  intent.  In  Wheelden  v.  Wilson,^ 
which  was  a  contest  between  the  mortgagee  under  such  a 
mortgage  and  an  attaching  creditor,  the  question  was  not 
noticed  ;  still,  the  mortgage  was  held  fraudulent  in  intent ; 
although  it  w^as  admitted  that  while  "  it  may  not  have  been 
the  intention  of  either  the  mortg:ao-ee  or  the  morto-ajrer  to 
perpetrate  a  moral  fraud,"  yet  the  fact  that  "  they  both 
intended  to  place  the  property  mortgaged  beyond  the  reach 
of  legal  process,  and  thereby  to  delay  if  not  to  defeat 
creditors,"  Avas  held  to  constitute  "  a  legal  fraud."  In  the 
recent  case  of  Deering  v.  Cobb,^  the  adjudication  was  upon 
the  subject  of  the  accretions  to  the  stock  of  goods  pending 
the  mortgage.  From  these  cases,  it  may  be  inferred  that 
the  propriety  of  such  conveyances  is  no  longer  questioned 
in  Maine. 

In  none  of  these  cases  is  any  attention  paid  to  the  ques- 
tion of  a  reserved  power  of  sale  by  the  mortgager,  except 
in  Googins  v.  Gilmore,  where  it  is  fairly  decided,  so  as  to 
place  Maine  in  the  list  of  those  States  sustaining  the  valid- 
ity of  such  conveyances.  Still  it  is  plain  that  the  question 
has  not  been  fully  considered,  and  that  they  are  sustained 
by  indirection,  not  by  positive  judicial  opinion.  The  deci- 
sion of  such  cases,  where  the  fraudulent  character  and 
effect  of  the  transaction  are  urged  upon  the  court,  as  was 
done  in  Googins  v.  Gilmore,  will  be  left  to  the  jury  as  a 
question  of  fraud  in  fact;  which,  in  the  absence  of  any 
positive  rule  to  be  applied  by  the  court  as  matter  of  law,  is 
equivalent  to  an  abdication  by  the  court  of  all  opinion  on 
the  subject,  in  favor  of  the  jury. 

Kentucky. 

§  98.   Reserved  power  of  sale  merely  a  badge  of  fraud 

in  Kentucky. — One  case  is  presented  in  Kentucky,  involv- 

1  44  Me.  11.  *  74  Me.  332  (1883). 

11  161 


§    98  FRAUDULENT    MORTGAGES    OF    JMEUCIIANDISE. 

ing  the  question,  in  which  the  Court  of  Appeals  seems  ad- 
visedly to  have  adopted  the  doctrine  that  the  only  effect  of 
such  an  agreement  or  reservation  is  that  of  a  bado^c  of 
fraud.  In  Ross  v.  Wilson,^  a  chancery  case,  the  mortgage 
-was  on  a  stock  of  goods  in  trade,  and  by  plain  implication 
from  the  recital  that  it  should  cover  goods  "  purchased  in 
the  usual  course  of  business,"  the  mortgager  was  to  con- 
tinue to  sell  the  jxoods  in  the  ordinarv  Avav,  as  he  did  do. 
It  was  held  that  the  mortgagee  acquired  no  right  to  the  sub- 
sequently purchased  goods.  But  neither  the  circumstance 
that  the  morto-affer  had  undertaken  to  o-ive  him  such  risfht, 
nor  the  discretionary  power  to  sell  the  goods  in  the  ordinary 
course  of  business,  was  considered  to  render  the  transaction 
fraudulent  as  to  creditors,  as  had  been  held  by  the  chancel- 
lor below.  The  court  declined  to  adopt  the  views  of  the 
courts  of  New  York,  Illinois,  and  New  Hampshire,  think- 
ing the  cases  from  those  States  not  exactly  analogous. 
The  mortgagee's  acquiescence  in  the  sales  by  the  mortgager 
was  taken  as  a  badge  of  fraud  merely  ;  but  the  court  did 
"  not  perceive  in  it  any  such  evidence  of  meditated  fraud 
on  the  part  of  Seibert,  as  was  requisite  to  establish  the 
allegation  of  a  sale  of  his  property  with  the  fraudulent  in- 
tention of  hindering  and  delaying  his  creditors."  From 
this  lansuao-e  it  is  evident  that  the  court  considered  the 
question  of  fraud  in  such  a  conveyance  as  resting  in  intent. 
It  appears,  also,  that  no  distinction  was  made  between  pos- 
session alone  and  possession  with  power  of  disposition. 
The  established  rule  in  Kentucky  was  referred  to  as  applica- 
ble to  the  case,  that  while  absolute  sales  of  personal  j^rop- 
erty  not  accompanied  by  possession  are  fraudulent  ^;er  se,^ 
this  rule  does  not  embrace  mortgages  or  deeds  of  trust, 
given  as  security  merely,  in  which  class  of  cases  the  cir- 

1  7  Bush,  29  (1809). 

2  See  Woodrow  v.  Davis,  2  B.  Mon.  298  (1842) ;  Jarvis  v.  Davis,  14  Id.  629 
(1854). 

162 


VIEWS    OF    THE    AMEUICAX    MINORITY.  §    99 

cumstance  of  possession  is  but  a  matter  of  evidence. 
Vernon  v.  Morton^  and  Lyons  v.  FiekP  were  cited  on  this 
point,  in  which  cases,  how^ever,  there  was  no  discretionary 
power  of  sale  reserved,  and  possession  alone  furnished  the 
evidence  of  fraud. 

§  99.  The  question  of  fraud  in  conveyances  as  shown 
by  mere  possession  not  well  settled  in  Kentucky.  —  The 

law  with  regard  to  fraud  in  conveyances  cannot,  however, 
be  said  to  be  settled  in  Kentucky,  even  to  the  satisfaction 
of  the  courts.  As  early  as  1838,  the  Court  of  Appeals 
observedthat  the  distinction  between  absolute  and  condi- 
tional conveyances  of  chattels,  so  far  as  concerned  the 
question  of  possession,  was  purely  arbitrary  and  not  founded 
on  reason,  and  that  whatever  might  be  the  true  distinction 
as  to  the  effect  of  possession  in  such  cases,  it  w^as  not 
"consistent  with  either  sound  policy  or  the  harmony  of 
legal  science  "  to  hold  that  possession  alone,  when  retained 
under  an  absolute  conveyance,  would  be  fraudulent  to  any 
greater  extent  than  possession  alone  would  be  under  a  con- 
veyance given  merely  by  w^ay  of  security.^  This  dissatis- 
faction was  re-echoed  in  the  recent  case  of  Vanmeter  v. 
Estill,*  in  which  the  practice  was  approved  of  relieving  the 
rule  as  to  absolute  conveyances  of  its  harshness,  by  estab- 
lishing in  particular  cases  exceptions  to  the  rule.  Accord- 
ingly, in  that  case,  where  the  vendor  of  personal  property 
had  remained  in  possession,  the  distinction  was  taken  that 
the  creditor  waio  complained  had  given  credit  after  the  sale 
of  the  property  and  with  notice  of  it,  which  circumstance 
relieved  the  case  of  all  fraud  as  to  him. 

Probably  no  reason  can  be  urged  against  this  decision  ; 
and  it  simply  illustrates  the  power  of  sound  principles  of 
jurisprudence  when  directed  advisedly  against  musty  i)rece- 

1  8  Dana,  247.  »  Daniel  v.  Morrison,  6  Dana,  182. 

2  17  B.  Mon.  543.  *  78  Ky.  456  (1880). 

163 


§    100      FRAUDULENT   MORTGAGES    OF   MERCHANDISE. 

dents.  In  truth,  there  never  was  any  good  reason  why 
possession  alone  should  have  been  regarded,  in  any  jurisdic- 
tion, as  more  than  evidence  to  be  considered,  by  either 
court  or  jury,  in  determining  the  question  of  fraud ;  and 
there  was  never  any  sound  reason  for  a  distinction  in  this 
respect  between  absolute  and  conditional  sales.  Mere 
possession,  therefore,  should  ahvays  be  taken  as  but  a  cir- 
cumstance, and  not  always  a  badge  of  fraud ;  should  be  con- 
sidered by  the  jury  as  but  a  circumstance,  under  any  issues 
whatsoever  that  may  be  presented  to  them ;  and  should  be 
w^eighed  in  like  manner  by  a  court  upon  which  may  be  de- 
volved the  duty  of  finding  the  facts.  But  possession 
coupled  with  a  discretionary  power  of  sale  in  the  grantor 
has  a  broader  effect,  and  presents  new  considerations,  and 
these  have  led  many  courts  to  declare  a  rule  for  such  cases, 
far  different  from  that  which  pertains  to  cases  involving 
mere  possession.  In  the  light  of  these  distinctions,  it  would 
be  easy  to  relieve  the  jurisprudence  of  any  State  of  all  rules 
on  the  subject  of  possession  that  are  merely  arbitrary  and 
not  founded  in  sound  reason,  and  to  make  that  jurispru- 
dence illustrative  of  both  "  sound  policy  "  and  "  the  har- 
mony of  legal  science,"  by  adopting  the  rules  announced 
in  Eobinson  v.  Elliott,  Blakeslee  v.  Eossman,  Collins  v. 
Myers,  and  Lang  v,  Lee. 

Kansas. 

§  100.   The  Kansas  view ;  tlie  question  of  the  fraudu- 
lent character  of  such  conveyances  one  of  good  faith.  — 

In  the  case  of  Frankhouser  v.  Ellett,^  the  Supreme  Court 
of  Kansas  was,  by  the  opinion  of  a  majority  of  its  three 
judo-es,  committed  to  the  doctrine  that  such  conveyances 
are  not  essentially  fraudulent.  The  case  presented  was  a 
chattel  mortgage  upon  a  stock  of  goods,  the  mortgagee 
continuing  in  possession,  and  controlling  and  disposing  of 

1  22  Kas.  127 ;  31  Am.  Eep.  171. 
164 


VIEWS    OF   THE   AMERICAN   MINORITY.  §    100 

the  ffoods  "  with  the  consent,  knowledire,  and  airreement " 
J  of  the  mortgagee,  until  the  goods  remaining  on  hand  were 
attached  at  tlie  suit  of  his  creditor.  The  opinion  of  the 
majority  of  the  Supreme  Court,  after  discussing  the  gen- 
eral characteristics  of  chattel  mortgages,  first  decides  that 
under  the  Kansas  statutes,  the  mere  retention  of  possession 
of  mortgaged  personal  property  is  not  at  all  invalid,  pro- 
vided the  mortgage  has  been  duly  filed.  As  authorities 
for  this  proposition,  a  number  of  cases  are  cited  from  Mich- 
igan, Iowa,  Massachusetts,  and  other  States,  which  are 
authorities  no  doubt  on  that  subject. 

Proceeding  then  to  consider  the  element  of  a  reserved 
power  of  sale  and  disposition,  the  opinion  discusses  the 
question,  in  view  of  the  facts,  as  one  of  good  faith  or  inten- 
tional fraud.  The  fact  of  the  necessary  and  inevitable 
tendency  of  such  an  arrangement  does  not  seem  to  be  con- 
sidered ;  and  so  far  as  the  reservations  for  the  benefit  of  the 
debtor  are  concerned,  they  are  deemed  to  be,  in  that  case  at 
least,  as  of  small  importance,  and  not  worth  much  reflection, 
in  considering  the  question  of  good  faith,  which  is,  through- 
out the  opinion,  the  controlling  one  as  to  this  feature  of  the 
case.  The  following  are  announced  as  the  conclusions  of 
the  court :  "  We  think  the  rule  to  be,  that  where  a  mort- 
gage is  given  upon  a  stock  of  goods,  and  by  agreement  out- 
side the  mortgage,  the  mortgager  is  permitted  to  continue 
business  and  dispose  of  the  goods  in  the  ordinary  way,  and 
use  some  portion  of  the  proceeds  in  the  support  of  his  fam- 
ily, the  transaction  will  be  upheld  or  condemned,  according 
as  it  IS  entered  into  and  carried  out  in  good  faith  or  not. 
The  mortgager,  if  he  may  keep  the  possession,  may  as  well 
make  the  sales  as  a  stranger.  He  acts  in  that  respect  as  a 
quasi  agent,  at  leasts  of  the  mortgagee,  and  as  such  agent  and 
salesman  is  entitled  to  compensation  for  his  services. 
Doubtless  such  arrangements  are  liable  to  abuse,  and  should 
always  be  closely  scanned  ;  but  still  they  are  not  absolutely 

165 


§  100   FRAUDULENT  MORTGAGES  OF  MERCHANDISE. 

and  ill  all  cases  to  be  adjudged  void  as  matter  of  law." 
And  as  authorities  for  these  views,  the  cases  i)reviouslv 
cited  were  referred  to  generally,  some  of  which  do  indeed 
involve  the  same  question,' but  many  of  which  are  cases 
turning  on  cither  the  question  of  possession  alone,  or  that 
oi  a  lien  in  equity  by  substitution.  Horton,  C.  J.,  dis- 
sented in  a  brief  but  earnest  opinion,  holding  a  chattel 
mortgage  with  such  arrangement  engrafted  upon  it,  whether 
on  its  face  or  by  outside  agreement,  to  be  a  mere  personal 
security,  a  so-called  mortgage  destroyed  in  effect  by  its  own 
provisions,  an  arrangement  not  advantageous  to  the  mort- 
gagee, but  beneficial  to  the  mortgager  and  injurious  to  other 
creditors,  and  therefore  fraudulent  and  void  ;  in  support  of 
which  conclusions  numerous  authorities  were  cited.  Per- 
haps by  reason  of  this  protest  from  the  chief  justice,  the 
reference  made  to  this  decision  in  a  later  case  is  such  as  to 
be  calculated  to  detract  somewhat  from  its  value  as  an 
authority. 

The  case  of  Cameron  v.  Marvin^  presented  one  chattel 
morto-age  on  merchandise  which  on  its  face  allov/ed  the 
morto-acrer  to  continue  his  reo-ular  business,  and  others  with- 
out  such  stipulation,  much  of  the  property  in  which  he  had 
also  sold.  The  mortgages  were  declared  void  for  another 
reason,  and  the  case  was  considered  and  decided  with  ref- 
erence to  the  questions  of  a  pledge  of  chattels,  and  a  race  of 
dilio-ence  between  creditors.  Counsel  had  however  argued 
that  the  mortgages  were  void  by  reason  of  the  reserved  power 
of  sale  in  course  of  business,  in  reference  to  which  the  opinion 
pronounced  by  one  of  the  two  judges  who  concurred  in  the 
majority  opinion  in  the  preceding  case,  said:  "It  is  at 
least  doubtful  whether  said  mortgages  were  void  merely 
because  the  plaintiffs  permitted  the  mortgager  to  sell  some 
of  the  mortgaged  property;"  citing  as  an  authority  for  this 
doubt,  Frankhouser  v.  EUett. 

1  26  Kas.  612. 
IGG 


I'HE   MINORITY   VIEWS   FAVORED.  §    101 


CHAPTER  yi. 

THE  MINORITY  VIEWS  FAVORED. 

Section  101.  Such  conveyances  criticised  in  Alabama,  but  questions  of 
fraud  left  to  the  jury. 

102.  The  Alabama  view  as  to  other  frauds  in  conveyances. 

103.  The  general  doctrine  iu  Texas;  the  fact  of  fraud  estab- 

lished only  by  proof  of  intent. 

104.  Reserved  power  of  sale  a  fatal  feature  before  a  court. 

105.  Reserved  power  of  sale  not  conclusive  of  fraud  when  before 

a  jury. 

106.  The  Texas  views  of  such  conveyances  summarized. 

Alabama. 

§  101.  Such  conveyances  criticised  in  Alabama,  but 
questions  of  fraud  left  to  the  jury.  —  The  Supreme 
Court  of  Alabama,  after  apparently  assenting  most  cor- 
dially to  this  rule  in  Wiswall  v.  Ticknor,^  has  subsequently 
given  effect  to  it  in  a  more  qualified  manner,  surrounding  it 
with  certain  technical  questions  ;  such  as,  that  insolvency  of 
the  debtor  mi'ist  intervene  to  make  the  transaction  fraudu- 
lent ;  '^  and  that  the  instrument  cannot  be  declared  fraudu- 
lent upon  its  face  as  against  creditors,  when  it  does  not 
show  upon  its  face  that  there  are  other  creditors.^  But 
the  facts  calling  for  the  application  of  the  rule  are  given 
much  consideration  (in  connection  with  other  circum- 
stances) in  Johnson  v.  Thweatt.*  In  Price  v.  Mazange,^ 
affirming   Constantine  v.  Twelves,  the    court  animadverts 

'  6  Ala.  178. 

2  Ticknor  v.  Wiswall,  9  Ala.  305;  Constantine  v.  Twelves,  29  Ala.  607; 
King  V.  Kenan,  38  Ala.  63. 

3  29  Ala.  at  p.  614. 
*  IS  Aln.  741. 

5  31  Ala.  701. 

167 


§    102      FRAUDULENT   :viORTGAGES    OF   MERCHANDISE. 

with  just  severity  upon  the  vicious  features  of  such  trans- 
actions among  merchants,  saving  of  the  one  in  question 
that  it  "  has  not  even  the  dubious  merit  of  providing  that 
the  proceeds  of  sales  to  be  made  by  Bostwick  shall  be  paid 
over  to  the  mortgagee."  But  the  idea  advanced  in  Johnson 
V.  Thweatt  is,  that  if  the  vicious  features  do  not  appear  on 
the  face  of  the  instrument,  the  case  is  to  turn  upon  the 
question  of  intent,  which  must  be  submitted  to  the  jury. 
To  this  class  of  cases  is  thus  applied  the  same  general  rule 
that  in  Alabama  is  allowed  to  govern  all  cases  of  fraud 
in  conveyances,  namely,  that  fraud  is  a  matter  restino-  iu 
intent,  and  is  therefore  always  to  be  left  to  the  determina- 
tion of  a  jur}'. 

In  Smith  v.  Leavitts,^  the  reservation  by  the  grantor 
under  a  trust  assignment  of  a  stock  of  goods,  of  the  power 
of  controlling  and  selling  the  goods  "in  the  same  manner 
as  before  the  assignment,"  and  his  actual  control  of  the 
property  accordingly,  were  said  to  "  clearly  establish  the 
want  of  good  faith  in  this  entire  transaction,  and  show  that 
the  assignment  was  a  device  to  defraud  creditors,  and 
through  that  medium  to  give  the  debtor  the  control  and 
enjoyment  of  his  property."  But  these  necessary  infer- 
ences from  the  facts,  it  was  held  the  jury  could  alone  draw, 
"  as  they  alone  could  determine  the  existence  of  the  facts." 

§  102.  The  Alabama  view  as  to  other  frauds  in  convey- 
ances.—  It  was  said  in  one  early  case  that  "  fraud  is  a 
question  of  law  when  the  facts  arc  ascertained;  "  '^  and  in 
another,  a  reservation  by  the  assignor  under  an  assignment 
for  the  benefit  of  creditors,  for  the  support  of  himself  and 
family,  was  held  to  render  the  assignment  fraudulent  and 
void  as  to  creditors;  and  it  was  said  that  where  "  the  con- 
clusion of  fraud  naturally  flows  from  the  facts  of  the  case, 
the  court  is  clearly  competent,  and  is  bound  to  pronounce 

1  10  Ala.  92.  '  Avres  v.  Moore,  2  Stew.  336  (1830). 

168 


THE    MINORITY   VIEWS   FAVORED.  §    103 

the  deed  fraudulent  and  void."  ^  But  in  a  later  case,  the 
question  of  fraud,  as  shown  by  a  reservation  to  the  benefit 
of  the  mortgager  under  a  mortgage,  was  treated  as  a  question 
purely  of  fraudulent  intent.^ 

In  Wiley  v.  Knight,^  where,  under  a  mortgage  upon  farm- 
ing stock,  implements,  crops  and  provisions,  the  mortgager 
retained  the  possession  and  the  use  of  the  property, 
part  of  it  being  consumable  in  the  use,  this  was  held  to 
render  the  mortofas^e  fraudulent  and  void  as  to  other  credit- 
ors,  entirely  irrespective  of  the  intent  of  the  parties.  But 
in  the  later  case  of  Reynolds  v.  Welch,*  this  was  held  to  be 
an  adjudication  as  to  constructive  fraud  only;  and  it  was 
said,  "  there  can  be  no  actual  fraud  Avithout  intention." 
And  in  other  earlier  cases  of  conveyances  similar  to  that  in 
Wiley  V.  Knight,  involving  farming  property  consumable  in 
the  use,  it  was  held  that  this  circumstance  did  not  avoid  the 
conveyance  pe?*  se,  because  the  use  and  consumption  of  the 
provisions  and  produce  on  the  farm  might  assist  in  produc- 
ing additional  assets  by  the  cultivation  of  the  land.^ 

Texas. 

§  103.  The  general  doctrine  in  Texas  ;  the  fact  of  fraud 
established  only  by  proof  of  intent.  — The  attitude  of  the 
Supreme  Court  of  Texas  toward  this  question  is  peculiar. 
The  doctrine  of  Robinson  v.  Elliott  was  expressly  adopted 
in  Peiser  v.  Peticolas.^  Previous  to  this,  it  was  the  general 
practice  in  this  State  to  treat  all  cases  of  fraud  in  convey- 
ances as  turning  upon  intent,  and  as  presenting  questions 
for  the  jury,  and  not  for  the  court,  whose  duty  it  was  to 
explain  the    nature  and  character  of   fraud  to  the  jury.^ 

'  Richards  v.  Hazzard,  1  Stew.  &  P.  139  (1831). 

2  Reynolds  v.  Welch,  47  Ala.  200  (1872). 

3  27  Ala.  336.  *  47  Ala.  200. 

s  Ravisies  v.  Alston,  5  Ala.  297 ;  Elmes  v.  Sutherland,  7  Ala.  262. 

6  50  Tex.  638;  32  Am.  Rep.  621  (1879). 

'  Howerton  v.  Holt,  23  Tex.  51 ;  Green  v.  Banks,  24  Id.  508. 

169 


§    103      FRAUDULENT   3IORTGAGE8    OF    MERCHANDISE. 

*'  The  greatest  means  of  control  wliich  courts  have  in  rela- 
tion  to  this  subject,  arc  to  be  found  in  their  power  of 
gi'anting  a  new  trial,  if  the  verdict  should  not  properly  re- 
spond to  the  facts  of  the  case."  ^  So,  where  the  Supreme 
Court  was  satisfied,  from  an  examination  of  the  facts  of  the 
case,  that  a  jrcneral  assio-nmcnt  "  was  made  in  fraud  of 
creditors,  and  should  certainly  have  been  so  found  by  the 
jury,"  a  new  trial  was  granted  for  this  reason;  the  court 
applying  principles  of  equity  in  considering  the  case  in  this 
manner.-  And  in  another  case,  heard  at  the  same  term, 
and  involving  the  same  general  assignment,  it  was  said  that 
"  a  court  of  equity,  having  a  right  to  find  the  facts  from 
the  evidence,  might  well  infer,  from  these  established  and 
patent  facts,  the  additional  and  important  fact  of  fraudulent 
intent;  and  having  thus  found  it,  declare  the  legal  conse- 
quence, by  setting  aside  the  deed  as  void,  just  the  same  as 
though  the  fraudulent  intent  was  confessed  in  the  petition." 
But  this  power  of  ordinary  courts  of  equity,  of  finding  a 
material  fact,  was  disavowed  as  not  pertaining  to  the  courts 
of  Texas,  in  causes  involving  principles  of  equity,  any  more 
than  in  those  involving  questions  of  law.^  The  same  prin- 
ciple was  applied  in  a  later  case,  where  the  evidence  Avhich 
might  have  sustained  a  jury  in  declaring  fraud  was  consid- 
ered insufiicient  to  authorize  the  court  in  so  doing;  for 
while  the  court  undoubtedly  had  power  to  declare  a  convey- 
ance fraudulent,  it  was  a  power  to  be  exercised  with  great 
caution,  and  only  in  a  very  clear  case.^  To  this  extent  had 
the  action  of  the  courts  in  reference  to  fraud  in  conveyances 
been  embarrassed  by  this  question  of  procedure,  considered 
in  the  supposition  that  fraud  can  never  be  shown  as  a  matter 
of  fact  except  by  proof  of  intent. 

'  Howerton  v.  Holt,  supra,  at  p.  62. 
2  Carlton  v.  Baldwin,  22  Tex.  724. 
»  Baldwin  v.  Teet,  22  Id.  708. 
*  Bailey  v.  Mills,  27  Id.  434. 
170 


THE    3IINORITY    VIEWS    FAVORED.  §    104 

§  104.  Reserved  power  of  sale  a  fatal  feature  before  a 
court.  —  Peiser  v.  Peticolas  ^  presented  the  question  of  a  dis- 
cretionary power  of  sale  under  a  mortgage  upon  a  stock  of 
goods,  not  appearing  upon  the  face  of  the  instrument,  but 
shown  clearly  by  the  facts  in  evidence.  The  case  being  tried 
by  the  court  without  the  intervention  of  a  jury,  the  mort- 
gage was  held  valid.  Upon  appeal,  the  Supreme  Court  con- 
sidered the  question  presented  as  one  of  legal  fraud.  The 
practice  above  referred  to  of  leaving  all  such  questions  to 
the  jury  was  not  now  an  obstacle  in  the  way  of  the  court ; 
nor  was  it  embarrassed,  as  was  another  court  in  Cheatham 
V.  Hawkins,-  by  the  fear  that  the  trial  judge  as  a  court 
might  have  erred  in  instructing  himself  as  a  jury.  It  was 
adopted  as  a  legal  conclusion,  that  a  discretionary  power  of 
sale  under  such  a  mortgage  is  inconsistent  with  its  true  pur- 
poses, is  a  reservation  for  the  use  and  the  benefit  of  the  debtor, 
and  makes  the  instrument  a  mere  expression  of  confidence ; 
and  the  fraud  in  such  a  case  is  characterized  as  "well-de- 
fined legal  fraud."  Robinson  v.  Elliott  and  Collins  v.  Myers 
were  cited  with  express  approval ;  and  it  was  said  that  this 
principle  of  law  "  should  be  declared  by  the  court,  if  the 
intent  and  purpose  of  the  parties  to  make  such  a  mortgage 
are  manifest  from  the  terms  of  the  instrument  itself,  or  by 
the  jury  if  not  so  manifest,  but  clearly  shown  by  uncontra- 
dicted testimony ;  the  principle  is  the  same,  the  only  dif- 
ference being  as  to  the  character  of  the  evidence  and  the 
mode  by  which  it  is  established. ' '  '^  The  judgment  below  was 
reversed,  and  it  was  said  the  verdict  of  the  jury  to  the  same 
effect  as  that  judgment  should  have  been  set  aside. 

This' doctrine  was  reafiirmed  in  Crow  v.  Bank,*  by  the 
court ;  but  that  case  was  distinguished  by  the  circumstance 
that  the  evidence  tended  to  prove  that  the  sales  made  of  the 
goods  by  the  mortgagers  were  made  as  agents  of  the  mort- 

1  50  Tex.  638.  3  50  Tex.  at  p.  639. 

2  76  N.  C.  335.  *  52  Id.  362. 

171 


§  105   FRAUDULENT  MORTGAGES  OF  MERCHANDISE. 

gagees,  and  the  proceeds  were  applied  to  their  debt ;  in  view 
of  which  the  transaction  was  sustained  as  valid. 

§  105.  Reserved  power  of  sale  not  conclusive  of  fraud 
when  before  a  jury.  —  But  in  Scott  v.  Alford,^  where  the 
case  was  presented  to  a  jury,  quite  a  different  view  was 
taken  of  the  functions  of  the  court.  The  conveyance  in 
this  case  was  a  deed  of  trust  upon  a  .stock  of  goods  in  trade, 
with  an  express  recognition  on  its  face  of  the  power  of  sale 
by  the  grantors  in  the  conduct  of  their  business.  The  ver- 
dict having  been  in  favor  of  the  conveyance,  the  case  was 
considered  by  the  appellate  court  in  reference  to  a  request 
to  the  trial  court  to  charge  the  jury  that  the  feature  of  the 
deed  above  mentioned  made  it  fraudulent  and  void.  This, 
it  was  held,  was  correctly  refused.  There  would  be  no 
legal  deduction  of  fraud  in  such  a  conveyance.  The  fea- 
ture referred  to  was  an  obvious  badge  of  fraud,  and  it  may 
be  would  have  justified  the  jury,  or  even  have  required  them 
to  return  a  verdict  of  fraud,  but  it  would  not  warrant  a  con- 
clusive deduction  of  fraud  by  the  court,  and  therefore  there 
was  no  error  in  declining  the  instruction  asked.  Peiser  v. 
Peticolas  was  not  in  express  terms  overruled,  but  it  was 
distinguished.  The  court  was  in  both  cases  composed  of  the 
same  members,  but  the  opinions  were  rendered  by  different 
judges,  though  without  dissent  in  either  case.  The  distinc- 
tion taken  as  to  Peiser  v.  Peticolas  was,  that  it  was  tried  by 
a  court  exercising  the  blended  functions  of  court  and  jur}^ 
so  that  it  could  only  be  in  a  case  where  no  jury  should  in- 
tervene, that  such  a  conveyance  would  present  a  case  of 
"  well  defined  legal  fraud."  So  upon  these  slight  distinc- 
tions, that  the  instruction  asked,  as  to  which  error  was 
assigned,  was  itself  technically  erroneous,  and  that  no  com- 
plaint was  made  as  to  the  instructions  actually  given,  or  to 
the  finding  of  the  jury  on  the  evidence  submitted  to  them, 

1  53  Tex.  82  (1880). 
172 


THE    MIXOrJTY    VIEWS    FA  YOKED.  §     106 

the  verdict  in   Scott  v.  Alford,  in  favor  of  the  validity  of 
the  conveyance,  was  sustained. 

§  106.  The  Texas  views  of  such  conveyances  summar- 
ized. Recent  legislation  on  the  subject.  —  The  result 
from  these  cases  may  be  summed  up  as  follows :  If  a  mort- 
gage, with  a  discretionary  power  of  sale  reserved  to  the 
mortgager,  be  presented  to  a  court  without  a  jury,  it 
will  be  declared  fraudulent  as  a  matter  of  law.  But  if 
presented  to  a  jury,  the  question  of  fraud  must  be  submit- 
ted to  them,  and  their  verdict  will  determine  the  question, 
subject  to  the  power  of  the  Supreme  Court  to  set  that  ver- 
dict aside.  If  Peiser  v.  Peticolas  be  followed,  a  verdict 
for  the  conveyance  would  not  be  sustained  in  any  case  in- 
volving a  discretionary  power  of  sale.  But  if  Scott  v. 
Alford  be  folloAved,  the  verdict  would  be  sustained  ;  unless, 
as  intimated  in  that  case,  it  should  satisfactorily  appear 
to  the  court  that  "  the  possession  and  power  of  disposition 
was  unreasonable  and  inconsistent  with  the  bona  fide  secur- 
ity of  a  debt  already  past  due,  and  a  delay  and  hindrance 
of  the  creditors;"  for  which  aspect  of  such  a  case,  Peiser 
V.  Peticolas  was  recognized  as  an  authority.^ 

All  these  cases  arose  prior  to  the  passage  of  an  act  on 
this  subject  by  the  Legislature,  in  1879,  which  went  into 
effect  in  July  of  that  year,  and  which  is  calculated  to  re- 
lieve the  courts  of  the  necessity  of  making  so  fine  distinc- 
tions. It  provides  as  follows  :  "  Every  mortgage,  deed  of 
trust,  or  other  form  of  lien,  attempted  to  be  given  by  the 
owner  of  any  stock  of  goods,  wares  or  merchandise  daily 
exposed  to  sale  in  parcels,  in  the  regular  course  of  the  busi- 
ness of  such  merchandise,  and  contemplating  a  continuance 
of  possession  of  said  goods,  and  control  of  said  business  by 
sale  of  said  goods  by  said  owner,  shall  be  deemed  fraudu- 
lent and  void."  - 

1  53  Tex.  at  p.  95. 

2  Act  to  regulate  assignments  for  benefit  of  creditors,  Gen.  Laws,  1879,  ch. 
63,  sect.  17. 

173 


§  107   FRAUDULENT  MORTOAGES  OF  MERCHANDISE. 


CHAPTER    YII. 

THE    QUESTION   NOT  A   VITAL   ONE    IN  SOME  JURIS- 
DICTIONS. 

Section  107.  Rhode  Island ;  the  question  not  considered. 

108.  Maryland;  the  question  not  discussed. 

109.  New  Jersey;  general  rules  respecting  fraud  in  conveyances. 

110.  Vermont;  the  question  not  a  practical  one. 

111.  Georgia;  the  question  eliminated  by  statute. 

112.  California  and  Nevada;  mortgages  of  chattels  limited  by 

statute. 

113.  Louisiana;  mortgages  of  chattels  unknown. 

§  107.   Rhode  Island ;  the  question  not  considered. — 

The  question  of  the  fraudulent  character  of  a  reserved 
power  of  sale  in  this  class  of  cases  has  not  addressed  itself 
to  the  attention  of  the  Supreme  Court  of  Rhode  Island. 
Three  cases  were  presented  to  that  court  in  1877,  in  which 
it  was  fairly  involved,  but  was  not  considered.  Williams 
V.  Briggs^  was  a  case  of  a  mortgage  on  the  tools,  fixtures, 
and  stock  in  trade  of  a  carriage  manufactory,  under  which 
the  grantor  continued  to  conduct  business  on  his  own  ac- 
count for  five  years  ;  after  which  he  made  a  voluntary 
assignment  for  the  benefit  of  his  creditors  generally.  The 
controversy  was  between  the  mortgagee  and  the  general 
assignee,  over  the  claim  of  the  former  to  hold  the  property 
acquired  by  the  mortgager  pending  the  mortgage,  which 
was  the  larger  portion  of  that  on  hand  at  the  time  of  the 
assignment.  The  case  was  considered  solely  as  presenting 
the  question  of  substituted  lien.  The  court  said:  "The 
case  raises  the  question  whether  a  mortgage  of  property  to 

1  11  R.  L  476. 
174 


QUESTION  NOT  VITAL  IN  tiOMK  JUKIbDlCTlONS.       §     1U7 

be  subsequently  acquired  convej's  to  the  mortgagee  a  title 
to  such  property  when  acquired,  which  is  valid  at  law  as 
against  the  mortgager  or  his  voluntary  assignee."  The  ac- 
tion being  trover,  by  the  administrator  of  the  mortgagee, 
for  the  conversion  of  the  after-acquired  goods,  the  court 
held  that  the  mortgagee  had  no  legal  title  in  them,  and  that 
he  could  not  recover  their  value  in  trover.  Cook  v.  Cor- 
thell  ^  was  a  case  of  a  mortgage  on  a  trader's  stock  of  goods, 
the  grantor  remaining  in  possession,  and  conducting  busi- 
ness for  more  than  a  year,  after  which  the  mortgagee  took 
possession.  The  suit  was  attachment  of  the  goods  by  a 
creditor  of  the  mortgager.  The  questions  considered,  both 
by  the  majority  of  the  court  and  the  dissenting  judge,  re- 
lated to  the  rights  of  the  mortgagee  under  his  possession. 
Williams  v.  Briggs  was  referred  to  as  an  analog-ous  case. 
In  neither  of  these  cases  was  the  character  of  the  transac- 
tion, in  view  of  the  mortgager's  retained  possession  and 
power  of  disposition,  argued  by  counsel  or  considered  by 
the  court. 

The  plaintiff  in  Williams  v.  Briggs,  having  failed  in  his 
action  at  law,  filed  his  bill  in  equity  to  enforce  the  equita- 
ble lien  W'hich  he  claimed  under  the  mortgage,  upon  the 
after-acquired  property,  and  this  case  was  presented  as 
Williams  v.  Winsor.^  The  lien,  which  w^as  of  no  force  at 
law,  was  considered  valid  in  equity,  and  the  plaintiff  now 
prevailed.  This  case  has  been  cited  as  placing  Rhode 
Island  in  the  same  category  with  Iowa  and  Michigan,  on  the 
subject  of  the  fraudulent  character  of  such  conveyances. 
It  will  be  seen,  however,  upon  examination,  to  be  confined 
to  the  question  of  lien  by  substitution.  Counsel  for  re- 
spondents submitted  simply  the  following  proposition  on 
the  subject  of  fraud:  "  The  provision  in  this  mortgage  re- 
lating to  after-acquired  property  does  not  belong  to  the 

'  11  R.  I.  482 ;  23  Am.  Rep.  518.  ^  12  R.  I.  9. 

175 


§    108       FRAUDULENT    MOKTtJACiES    OF    MERCHANDISE. 

class  of  contracts  of  Avhich  an  equity  court  "will  decree  a 
specific  performance,  because  such  a  transaction  is  against 
public  policy,  throwing  open  a  wide  door  to  possible  fraud." 
In  response  to  which  suggestion  the  court  said  ;  "  While  in 
some  States  a  mortgage  containing  a  poioer  to  sell  and  re- 
place,  or  Avhere  the  mortgager  retains  possession,  has  been 
held  to  be  therefore  void,  such  has  not  been* the  doctrine  of 
the  courts  in  this  State.  Here,  the  question  whether  such  a 
mortgage  is  fraudulent  or  not  is  a  fact  for  the  decision  of 
the  jury,  upon  the  circumstances  and  evidence  in  the  par- 
ticular case."  So  far,  then,  as  the  question  of  fraud  was 
considered  at  all  by  the  court  in  this  case,  it  was  considered, 
like  the  whole  case,  as  turning  upon  a  covenant  to  sell  and 
replace.  The  reporter  of  the  court,  in  a  note,^  refers  to  com- 
ments upon  this  case  in  the  Albany  Laiv  Journal,'^  in  which 
the  same  view  is  taken  of  the  case,  viz. :  as  presenting  the 
questions  of  i)ower  to  mortgage  property  in  futuro,  and  of 
a  lien  by  substitution.  It  can  scarcely  be  supposed  that  the 
court,  in  the  language  above  c|uoted,  intended  to  deny  the 
power  of  a  court  of  equity  to  pass  upon  such  a  question  of 
fraud  for  itself,  upon  independent  examination  of  the  facts, 
or  to  say  that  an  issue  of  fact  must  of  necessity  be  sent  to 
a  jury  in  every  such  case.  It  may  seem  plainly  inferable 
from  the  attitude  of  the  Supreme  Court  toward  such  ques- 
tions that  Rhode  Island  will  in  time  adopt  the  view  that 
such  conveyances  are  not  inherently  fraudulent;  but  it  is 
plain,  also,  that  the  question  has  not  yet  been  fully  con- 
sidered. 

§  108.  Maryland;  the    question   not    disciisscd.  —  The 

question  has  not  been  considered  by  the  Court  of  Appeals 
of  Maryland,  though  opportunities  have  been  afforded. 
Hudson  V.  Warner^  was  a  contest  in  equity  between  the 
mortgagees  under  a  mortgage  of  a  stock  of  goods  in  trade, 

1  12  K.  I.  fit  p.  13.  •'  17  A.  L.  J.  359.  ^  2  Uar.  &  Gill,  415  (1828). 

176 


QUESTION  NOT  VITAL  IN  SOME  JURISDICTIONS.       §    108 

and  subsequent  purchasers  from  the  mortgagers,  each  party 
claiming  to  have  received  delivery  of  the  property.  The 
case  was  determined  upon  the  question  of  notice  to  the  later 
claimant  of  the  earlier  conveyance.  The  possession  of  the 
mortgagers  for  two  years  was  not  considered  otherwise  than 
as  a  question  of  possession  alone  ;  and  this  was  held  to  be 
consistent  with  the  deed,  on  the  authority  of  Bucknall  v. 
Roiston.^  Hamilton  v.  Rogers  ^  involved  a  mortg-ase  on  a 
stock  of  goods  in  trade,  given  by  one  Worley,  covering 
also  "  all  renewals  of  and  substitutions  for  the  same  or  any 
part  or  parts  thereof,"  the  professed  object  being  "  to  in- 
clude not  only  the  articles  at  present  in  said  stores,  but 
whatever  may  be  at  any  time  therein,  in  the  course  of  said 
Worley's  business."  The  case  was  considered  by  the  Court 
of  Appeals  solely  with  reference  to  the  mortgagee's  right  to 
the  after-acquired  goods  ;  and  the  action  being  trespass,  it 
was  adjudged  that  he  had  no  such  right  as  to  sustain  an 
action  at  law.  The  same  principle  was  again  applied  in 
Rose  V.  Be  van, ^  which  was  a  suit  in  equity  involving  a 
similar  mortgage.  But  in  Butler  v.  Rahm,*  it  was  held 
that  such  a  conveyance  creates  a  valid  lien  in  equity  as  to 
after-acquired  goods;  this,  however,  was  the  exceptional 
case  of  a  railroad  mortgage  and  accretions  thereunder.  In 
neither  Hamilton  v.  Rogers  nor  Rose  v.  Bevan  was  the 
question  of  fraud,  as  arising  from  the  mortgager's  reten- 
tion of  the  power  of  sale  and  disposition,  discussed  or  con- 
sidered. 

Mortgages  on  stocks  of  goods  in  trade  are  of  occasional 
occurrence  in  Maryland.  Triebert  v.  Burgess^  was  an 
equity  case,  involving  a  parol  agreement  to  give  such  a 
mortgage,  of  which  jurisdiction  was  taken  ;  but  as  the  case 
was  inter  pai'ies,  the  question  above  referred  to  could  not 

1  Prec.  in  Chan.  285.  *  46  Id.  541. 

2  8  Md.  301.  5  11  7^,  452, 

3  10  7^.466. 

12  177 


§    10S>       FRAUDULENT    JIORTGAGES    OF    INIERCHANDISE. 

arise.  Preston  v.  Leighton  ^  was  a  contest  between  two  suc- 
cessive mortgagees  of  a  stock  of  goods,  the  earlier  mortgage 
being  sustained  ;  and  the  question  of  power  of  sale  by  the 
mortsraser  was  not  discussed  otherwise  than  to  refer  to  the 
fact  that  no  agreement  had  been  made  to  allow  such  a 
power. 

The  case  of  Price  v.  Pitzer'-^  indicates  a  disposition  to 
regard  the  doctrine  of  Robinson  v.  Elliott  with  favor.  A 
trader  conveyed  all  his  stock  in  trade,  with  other  property, 
to  trustees,  for  the  ostensible  benefit  of  creditors,  but  re- 
served the  right  to  carry  on  his  business,  paying  to  the 
trustees  a  portion  of  the  proceeds.  The  Court  of  Appeals 
held  the  deed  fraudulent  and  void,  characterizing  it  as  fol- 
lows: "The  practical  arrangement  contemplated  by  the 
provisions  of  the  deed  is,  by  virtue  of  its  authority,  to 
enable  Bloomenour  to  continue  his  business  of  merchandis- 
ing, without  interference  on  the  part  of  his  creditors,  until 
the  debts  are  all  paid  in  the  manner  indicated  by  him  in  the 
deed.  If  a  bold  scheme  like  this,  to  hinder  and  delay  his 
creditors,  and  to  make  their  rights  of  enforcing  payment  of 
their  claims  subordinate  to  the  mode  and  process  of  pay- 
ment provided  by  the  debtor  and  grantor  in  the  deed,  is 
not  in  palpable  and  unquestionable  violation  of  the  provi- 
sions of  the  statute  of  Elizabeth,  and  absolutely  void  as  to 
his  creditors,  it  is  difficult  to  define  what  would  be." 

§  109.  New  Jersey;  general  rules  respecting  fraud  in 
conveyances. — No  decisions  on  the  subject  are  found  in 
the  reports  of  the  State  of  New  Jersey,  and  apparently  a 
contest  has  never  been  made  there  over  the  validity  of  a 
mortgage  of  goods  in  trade  with  a  power  of  disposition 
reserved.  A  dictum  in  the  case  of  Miller  ads.  Pancoast^ 
has  sometimes  been  taken  as  evidence  of  an  inchnation  of  the 
Supreme  Court  toward  the  doctrine  that  such  a  reservation 

1  6  Md.  88.        2  44  jd,  521  (1875).        »  29  N.  J.  Law,  5  Dutch.  250  (1861). 
178 


QUESTION  NOT  VITAL  IN  SOME  JURISDICTIONS.       §    109 

would  merely  furnish  evidence  of  fraud  to  go  to  a  jury.  It 
is  doubtful,  however,  if  the  court  intended  to  express  any 
view  on  the  subject  in  reference  to  the  legal  effect  of  such  a 
transaction  upon  the  rights  of  creditors  ;  the  language  of 
the  opinion  is  limited  to  the  question  of  the  rights  of  pur- 
chasers. The  case  presented  was  a  mortgage  of  chattels, 
with  a  reservation  to  the  mortgager  of  possession  only  ;  the 
element  of  a  reserved  power  of  disposition  did  not  appear  ; 
nor  is  it  stated  that  the  chattels  were  merchandise.  The 
Supreme  Court  being  appealed  to,  for  advice  to  the  inferior 
courts  as  to  the  validity  of  the  conveyance,  it  w^as  held  that 
in  all  such  cases,  whether  the  reservation  of  possession  be 
fraudulent  or  not  "  is  a  question  of  intent  to  be  settled 
as  a  question  of  fact  by  a  jury."  After  thus  deciding  the 
case,  the  court  further  expressed  its  opinion  as  to  other  ques- 
tions which  might  possibly  arise  in  reference  to  fraudulent 
conveyances,  as  follows  :  — 

''Although  the  mortgage  may  not  be  invalid  against  cred- 
itors or  subsequent  purchasers  for  want  of  possession  in  the 
mortgagee,  it  by  no  means  follows  that  it  may  not  be  void 
against  subsequent  purchasers  by  reason  of  the  mortgagees 
sufferino;  the  mortgager  to  use  and  manage  the  mortcragred 
chattels  in  such  a  way  as  to  deceive  bona  fide  purchasers  as  to 
the  right  of  the  mortgager  to  sell  and  dispose  of  the  chattels ; 
as  in  case  of  the  stock  of  a  merchant  or  manufacturer,  if  the 
mortgagee  of  such  a  stock  should  permit  the  mortgager  to 
remain  in  possession,  selling  and  disposing  of  his  stock  with- 
out restriction  in  the  ordinary  course  of  trade,  such  conduct 
would  be  evidence  of  fraud  to  go  to  a  jury,  evidence  that 
the  mortgage  was  kept  on  foot  for  fraudulent  purposes  ;  and 
the  mortgage  would  be  held  void,  at  least  so  far  as  property 
sold  in  the  ordinary  course  of  the  trade  permitted,  was  con- 
cerned." This  is  a  statement  of  the  results  of  the  familiar 
doctrine  of  estoppel,  by  which  the  mouth  of  the  mortgagee 
would  be  closed  against  any  complaint  concerning  sales  to 

179 


§    109      FRAUDULENT   MORTGAGES   OF   IMERCHANDISE. 

bonajide  purchasers.  Such  sales  would  clearly  pass  the  title 
to  the  goods,  even  as  against  the  mortgagee;  and  cases 
applyingthe  rule  tosuchsales  are  numerous,  both  inEngland^ 
and  America.  It  by  no  means  follows,  from  the  proposition 
that  the  question  of  fraud  as  to  purchasers  must  go  to  a 
jury,  that  the  courts  of  New  Jersey  would  be  debarred  from 
applying  a  legal  rule  to  the  question  of  fraud  as  to  credit- 
ors,   when  the  facts  are  plain  and  undisputed. 

The  previous  course  of  adjudication  in  this  State  does 
not  appear  to  furnish  any  rule  for  this  particular  class  of 
cases,  should  one  arise.  The  general  rule  is  that  "  ques- 
tions of  fraud,  being  mixed  questions,  partly  of  law  and 
partly  of  fact,  must  always  be  determined  by  the  jury  and 
not  by  the  judges."  ^  But  "  what  is  evidence  of  fraud,  is 
a  question  of  law  ;"  ^  and  if  a  jury  fails  to  find  fraud  when 
the  evidence  warrants  it,  their  verdict  will  be  set  aside  as  a 
verdict  against  law.*  It  is  for  the  jury  merely  to  find  the 
facts,  and  the  law  will  pronounce  its  judgment  on  the  trans- 
action.^ And  in  the  courts  of  equity,  "  the  existence  of 
fraud  is  often  a  presumption  of  law  from  admitted  or  es- 
tablished facts,  irrespective  of  motive,  and  too  strong  to  be 
rebutted ; "  ^  which  is  the  principle  that  makes  a  voluntary 
settlement  on  a  wife  by  an  embarrassed  husband,  "  fraudu- 
lent as  against  creditors,  no  matter  how  pure  the  motive 
which  induced  it."  ^ 

Looker  v.  Peckwell  ^  is  inconclusive.  It  was  a  mortgage 
on  a  stock  of  goods  in  trade,  with  an  implied  power  of  sale  in 

'  See  ante,  sect.  31. 

2  Oliver  v.  Applegate,  5  N.  J.  Law,  2  South.  479;  Hendricks  i;.  Mount, 
Id.  738. 

3  Vanpelt  v.  Veghte,  14  Id.,  2  Green,  207. 
*  Cliver  v.  Applegate,  supra  (1819). 

5  Watkins  v.  Pintard,  1  N.  J.  Law,  Coxe,  378. 

6  Belford  v.  Crane,  16  N.  J.  Eq.  265  (1863). 
'  Id.  p.  270. 

8  38  N.  .J.  Law,  9  Vroom,  253  (1876). 

180 


QUESTION  NOT  VITAL  IN  SOME  JUKISDICTIOXS.       §111 

the  usual  course  of  business  ;  but  the  mortgage  was  not  at- 
tacked on  this  ground,  and  the  only  controversy  was  over 
twenty  barrels  of  flour,  newly  purchased  by  the  mortgager, 
which  Avas  levied  on  at  the  instance  of  a  creditor;  and  it 
was  held  that  the  newly  acquired  goods  did  not  pass  under 
the  lien  of  the  morto;ao:e. 

§  110.  Vermont;  the  question  not  a  practical  one. — 

The  rule  of  law  in  Vermont  on  the  subject  of  retention  of 
possession  is  so  broad  as  to  offer  no  opportunity  for  dis- 
tinctions between  possession  with  and  possession  without 
power  of  sale.  It  is  well  settled  in  that  State,  as  a  matter 
of  public  policy,  that  all  transfers  of  personal  property, 
whether  by  sale,  pledge,  or  mortgage,  miist  be  accompanied 
by  a  manifest  and  substantial  change  of  possession,  or  they 
will  be  voidable  at  the  suit  of  other  creditors  of  the  grantor. i 
This  rule  is  explained  to  be  a  peculiar  doctrine  of  construc- 
tive fraud;  "it  adopts  a  particular  mode  of  determining 
the  existence  of  the  vitiating  fraud  in  the  given  case  ;.  in  a 
sense,  it  propounds  a  kind  of  rule  of  evidence,  prescribing 
what  facts  proved  shall  be  held  to  show  the  existence  of 
such  fraud ;"  it  is  "  a  kind  of  conclusive  estoppel  in  jKiis.'"  '^ 
It  differs,  therefore,  from  ordinary  presumptive  fraud  only 
in  this,  that  the  presumption  is  conclusive. 

§  111.   Georgia  ;  the  question  eliminated  by  statute. — 

The  jurisprudence  of  Georgia  is  in  a  peculiar  condition  as 
to  this  question.  The  Legislature  of  this  State  has  gone 
so  far  as  to  legalize  "  mortgages  "  of  stocks  of  goods  in 
trade,  by  a  statute  which  provides  that  "  a  mortgage  may 
cover  a  stock  of  goods,  or  other  things,  in  bulk,  but  chang- 
ing in  specifics,  in  which  case  the  lien  is  lost  on  all  articles 
disposed  of  by  the  mortgager  up  to  the  time  of  foreclosure, 

1  Farnsworth  v.  Shepard,   6  Vt.  521    (1834);  Houston  v.  Howard,   39  Vt. 
54  (1866) ;  Weeks  v.  PrescoU.  53  Yt.  57  (1880). 

2  Daniels  v.  Nelson,  41  Vt.  161. 

181 


§    111      FRAUDULENT   MORTGAGES   OF   MERCHANDISE. 

and  attaches  on  the  purchases  made  to  supply  their  place."  * 
This  statutory  provision  has  been  several  times  sustained  by 
the  Supreme  Court,-  Thus  is  realized  the  very  idea  of  "  a 
floating  mortgage,  which  attaches,  swells  and  contracts,  as 
the  stock  in  trade  changes,  increases  or  diminishes," 
which  has  in  other  jurisdictions  been  characterized  as 
vicious.^  But  this  floating  lien  is  not  allowed  by  the  Su- 
preme Court  to  extend  to  any  such  portion  of  the  stock, 
when  seized  for  foreclosure,  as  may  be  in  excess  of  the 
amount  of  the  stock  on  hand  at  the  time  the  mortsaire  was 
given.  To  allow  the  mortgage  as  a  lien  on  any  greater 
amount  of  goods  would  be,  in  the  opinion  of  the  court,  to 
"open  the  door  to  unlimited  fraud. "^  This  shows  that 
the  judicial  mind  in  Georgia  is  not  wholly  insensible  to  the 
difficulties  attending  such  conveyances.  The  same  fact 
appears  in  a  later  case,  in  which  this  ruling  is  adhered  to. 
"  The  permission  to  give  such  a  mortgage,  though  a  very 
convenient  privilege,  is  one  very  easily  used  to  commit 
fraud;  and  we  think  the  spirit  of  the  code,  as  well  as  pub- 
lic policy,  requires  it  to  be  limited  as  we  have  limited  it. 
We  have  known  of  several  cases  where  mortgages  of  this 
character  have  been  given,  with  a  small  stock  at  the  time, 
and  large  purchases  made  on  credit  soon  afterwards.  The 
temptation  to  do  this,  if  possible,  would  lead  to  fraud,  and 
we  think  the  object  of  the  law  is  best  attained  by  keeping 
the  parties  within  the  amount  of  stock  on  hand  at  the 
time."^  This  recognition  of  the  tendency  of  such  trans- 
actions may  perhaps  indicate  the  common-law  view  which 
would  be  entertained  in  Georgia  if  the  courts  were  at 
liberty  to  apply  it.     In  general,  in  this  State,  a  reservation 

1  Code  of  Georgia,  1873,  sect.  1954. 

2  Chisolm  V.  Chittenden,  45   Ga,  213;  Anderson  v.  Howard,  49   Ga.  313; 
Goodrich  v.  Williums,  50  Ga.  425. 

3  Collins  V.  Myers,  10  Ohio,  547. 

*  Chisolm  V.  Chittenden,  45  Ga.,  at  p.  219. 

*  Goodrich  v.  Williams,  50  Ga.,  at  p.  435. 

182 


QUESTION  NOT  VITAL  IN  SOME  JURISDICTIONS.       §    112 

of  any  kind,  for  the  benefit  of  the  debtor,  at  the  time  he 
makes  a  conveyance,  destroys  its  validity  as  to  creditors.^ 
Courts  are  not,  however,  called  upon  to  instruct  juries  as  to 
badges  of  fraud  in  such  cases,  or  their  effect,  unless  espe- 
cially requested. - 

It  results  that  so  far  as  the  jurisprudence  of  Georo-ia 
fails  to  recognize  the  reservation  by  a  mortgager  of  the 
power  of  selling  the  goods  mortgaged  at  his  discretion,  as  a 
reservation  to  his  use,  it  is  due  to  the  action  of  the  Legis- 
lature rather  than  to  the  rulings  of  the  courts,  and  that  the 
Georgia  cases  fall  far  short  of  being  authorities  upon  the 
common-law  question. 

§  112.  California  and  Nevada;  mortgages  of  chattels 
limited  by  statute.  — -  The  question  under  discussion  cannot 
arise  in  California,  all  controversy  over  it  being  eliminated 
from  the  jurisprudence  of  that  State  by  the  adoption  of 
peculiar  statutory  provisions  concerning  mortgages  of 
personal  property.  The  character  of  goods  which  may  be 
made  the  subject  of  such  a  mortgage  is  indicated  in  express 
terms.  Twelve  classes  of  chattels  are  named,  in  none  of 
which  could  a  stock  of  merclyindise  in  trade,  or  other  prop- 
erty which  must  be  sold  or  consumed  to  be  used,  be  in- 
cluded.^ The  possession  of  mortgaged  chattels  is  regulated 
in  detail  by  statute.  These  statutes  undoubtedly  prevent 
much  vexatious  litigation.  They  are  to  be  commended  as 
prudent  applications  in  the  advance  of  the  principles  of  the 
wholesome  common-law  rule  which,  as  has  been  seen,  is 
adopted  so  generally  by  the  American  courts.  Prior  to 
these  statutes,  it  was  held  in  California,  under  the  provi- 
sions of  the  law  then  in  force,  that  retention  of  possession 

'  Edwards  v.  Stinson,  59  Ga.  443 ;  Mitchell  v.  Stetson,  64  Ga.  442. 
2  Nicol  V.  Crittenden,  55  Ga.  497,  head-notes  10  and  11. 
'  Civil  Code  of  Cal.,  sect.  2955;  Codes  and  Statutes,  sect.  7955;  amendment 
of  1878,  3  Hittell'8  Codes,  p.  289. 

183 


§  113   FRAUDULENT  MORTGAGES  OF  MERCHANDISE. 

by  a  mortgager  of  chattels  would  be  conclusively  fraudulent 
as  to  creditors,  and  that  a  stipulation  for  such  retention  of 
possession  would  have  that  effect,  although  the  mortgagee 
actually  took  possession,  for  it  would  be  a  possession  in 
violation  of  the  stipulation  in  the  mortgage.^ 

A  similar  result  is  attained  in  Nevada,  as  to  the  class  of 
cases  under  consideration,  by  the  statute  which  invalidates 
all  mortgages  of  personal  property,  unless  possession  be  de- 
livered to  and  retained  by  the  mortgagee ;  the  single  excep- 
tion being  made  of  growing  crops,  mortgages  of  which  are 
to  be  acknowledged  and  recorded. - 

§  113.  Louisiana;  mortgages  of  chattels    unknown. — 

Chattel  mortgages  are  unknown  to  the  law  of  Louisiana. 
Movables  are  not  susceptible  of  being  mortgaged.  Even  if 
made  in  another  State,  and  valid  there,  a  chattel  mortgage 
would  not  be  recognized  in  that  State. ^  The  question  will 
not,  therefore,  be  likely  to  be  presented  to  the  courts  of 
that  State. 

In  the  other  States  not  referred  to  by  name,  the  question 
seems  never  to  have  fairly  arisen  for  consideration  in  the 
courts  of  last  resort. 

1  Meyer  v.  Gorham,  5  Cal.  322  (1855). 

2  Compiled  Laws  of  Nevada,  1873,  sect.  294;  (ch.  26,  eect.  66). 

3  Delop  V.  Windsor,  26  La.  An.  185  (1874). 

184 


CRITICISMS    UPON    THE   DOCTRINE    EXAMINED.       5    114 


CHAPTEK  YIII. 

CRITICISMS  UPON  THE  DOCTRINE  EXAMINED. 

Section  114.  Summary  of  the  views  of  the  American  courts. 

115.  Objections  to  the  majority  doctrine  stated. 

116.  Is  the  doctrine  one  of  constructive  or  presumptive  fraud? 

117.  Constructive  and  presumptive  fraud  considered. 

118.  Fraud  as  a  question  of  law. 

119.  Distinction  between  actual  fraud  and  fraudulent  intent. 

120.  The  law  and  the  facts  in  cases  of  alleged  fraud. 

121.  Fraud  predicated  of  the  transaction  itself,  rather  than  of  the 

motives  of  the  parties. 

122.  The  courts  test  such  mortgages  by  their  characteristics. 

123.  Registration  does  not  validate  a  fraudulent  transaction. 

124.  The  policy  of  allowing  such  transactions  considered. 

125.  Arguments  in  favor  of  such  a  policy  answered. 

126.  Defective  views  of  the  subject  illustrated. 

127.  Characteristics  of  a  chattel  mortgage. 

128.  Effect  of  a  power  of  sale  reserved  to  the  mortgager. 

129.  Reasons  for  the  existence  of  the  doctrine. 

130.  Testimonj^  of  negative  witnesses. 

131.  Testimony  of  affirmative  witnesses. 

132.  Testimony  of  other  observers. 

§  114.   Suminarj'  of  the  views  of  the  American  courts. — 

From  this  review  of  the  cases  decided  in  the  courts  of  the 
various  States,  it  will  appear  that  in  the  large  majority  of 
those  where  the  question  has  been  considered,  the  result  is 
an  adjudication  that  a  mortgage  of  chattels  with  such  a 
reserved  power  of  sale  in  the  mortgager  is  positively  fraudu- 
lent, and  may  be  avoided  at  the  suit  of  a  creditor.  This 
doctrine  has  been  advisedly  adopted  in  fourteen  States ;  ^ 

1  Virginia,  New  York,  New  Hampshire,  Ohio,  Minnesota,  Wisconsin,  Illi- 
noia,  Missouri,  Tennessee,  Mississippi,  Colorado,  Oregon,  West  Virginia  and 
Indiana. 

185 


§    114       FKAUDULENT    MOllTGAGES    OF    MERCHANDISE. 

and  is  received  -with  favor  in  several  others.  It  is  further 
adopted  as  a  rule  of  law  in  Nebraska  to  this  limited  extent, 
that  it  Mill  be  applied  by  tlie  courts  Avhere  the  power  of 
sale  is  reserved  to  the  mortgager  on  the  face  of  the  instru- 
ment, but  cases  where  the  power  does  not  so  appear  will 
turn  upon  the  question  of  a  fraudulent  intent,  and  must  be 
submitted  to  a  jury.  In  North  Carolina  the  doctrine  is 
strongly  favored,  but  is  applied  only  as  a  matter  of  pre- 
sumptive evidence,  juries  being  recommended,  if  not  re- 
quired, to  reach  the  conclusion  that  such  transactions  are 
fraudulent,  through  a  process  of  presumptions. 

A  contrary  view  is  entertained  in  eight  States,  where  for 
various  reasons  it  has  been  held  that  jurisprudence  has  no 
substantive  rule  on  the  subject. 

In  Michigan,  fraud  in  this  class  of  cases  is  to  be  consid- 
ered only  as  resting  in  intent,  and  thus  as  presenting  an 
issue  of  fact  in  all  cases.  This  arbiti'ary  classification  is 
adopted  in  deference  to  a  statute  which  makes  fraudulent 
intent  a  question  of  fact  for  the  jury ;  which  statute  is  not, 
however,  in  other  cases  allowed  to  "  turn  principles  of  law 
into  questions  of  fact."  ^  In  Iowa,  fraud  in  such  cases  is 
in  like  manner  left  to  the  jury  as  a  question  of  fact;  but 
this  is  in  deference  to  a  statute  which  provides  that  the 
mere  retention  of  possession  under  a  chattel  mortgage  does 
not  invalidate  the  mortgage,  provided  it  is  acknowledged 
and  recorded ;  to  which  acts  the  statute  ascribes  a  legal 
effect  equivalent  to  actual  manual  delivery. 

In  Massachusetts,  fraud  in  such  cases  always  turns  upon 
the  question  of  fraudulent  intent,  proof  of  a  reserved  power 
of  sale  furnishing  only  presumptive  evidence  for  the  jury  ; 
although  in  other  cases  of  reseiTations  by  the  grantor,  such 
as  a  power  of  revocation,  or  the  use  of  property  consumable 
in  the  use,  intent  is  immaterial,  and  the  law  pronounces  its 
judgment  of  fraud. 

1  Pierson  v.  Manning,  2  Mich.  445. 

186 


CRITICISMS    UrON    THE    DOCTRINE   EXAMINED.        §     114 

In  Maine,  in  like  manner,  the  case  furnislies  presump- 
tions only,  which  are  to  go  to  the  jury  in  illustration  of  the 
question  of  fraud  in  fact,  by  which  is  meant  fraud  resting  in 
intent ;  and  the  courts  have  practically  no  opinion  on  the 
subject  of  the  fraud  in  these  cases.  In  Kentucky,  the  re- 
served power  of  sale  is  treated  as  only  a  badge  of  fraud,  to 
be  considered  by  the  jury  in  connection  with  the  question 
of  intent.  In  this  State  as  well  as  in  Maine,  no  distinction 
seems  to  be  observed  between  retained  possession  alone,  and 
possession  with  a  reserved  poAver  of  disposition.  Perhaps 
the  rule  is  to  be  considered  as  not  well  settled  either  way  in 
Kentucky,  in  view  of  the  fact  that  the  old  distinction  be- 
tween absolute  and  conditional  transfers,  as  to  the  inher- 
ently fraudulent  character  of  retained  possession  alone,  is 
considered  to  be  inconsistent  with  "  the  harmony  of  legal 
science."  ^ 

In  Kansas,  the  rule  is  adopted  that  the  question  of 
fraud  in  the  reservation  of  a  discretionary  power  of 
sale  is  a  question  of  good  faith  or  of  intent  to  defraud  ; 
but  this  rule  was  announced  by  a  divided  court,  in  but  one 
case,  the  decision  in  which  has  since  been  considered  of 
doubtful  propriety.  In  Alabama,  it  is  thought  that  such 
transactions  have  a  bad  appearance,  but  it  must  be  left  to  the 
jury  to  condemn  them,  because  there  is  in  this  State  "  no 
actual  fraud  without  intent."  In  Texas,  heretofore,  if  the 
mortgage  bore  the  reservation  of  a  power  of  sale  on  its 
face,  and  was  presented  to  a  court  alone,  it  would  be  de- 
clared fraudulent  ^er  se;  though  if  presented  to  a  jury,  the 
question  of  fraud  would  be  left  to  them,  subject  to  review 
by  the  court,  and  probably  it  would  be  the  duty  of  the  jury 
to  find  such  a  reservation  fraudulent;  but  all  these  dis- 
tinctions are  now  abolished  by  a  statute  which  declares  all 
such  transactions  fraudulent. 


^  Daniel  v.  Morrison,  6  Dana,  182. 

187 


§  116   FRAUDULENT  MORTGAGES  OF  MERCHANDISE. 

§  115.  Objections  to  the  majority  doctrine  stated. —  The 

dissenting  views,  which  find  support  in  the  adjudications  of 
the  eight  States  above  named,  have  been  pressed  ui)on  the 
consideration  of  the  courts  with  persistency,  and  have  been 
supported  by  ingenious  arguments.  A  recent  treatise  pre- 
sents an  elaborate  discussion  of  the  question,  from  which 
the  following  conclusions  are  there  deduced  :  First,  that 
*' the  doctrine  of  absolute  fraud  arisino;  in  a  mortiraire  of 
merchandise  from  the  mortgager's  retaining  possession  with 
a  power  of  disposal  in  the  usual  course  of  trade  *  *  * 
is  contrary  to  sound  principles  of  jurisprudence;  "  second, 
that  "it  is  contrary  to  sound  policy  ;"  and  third,  that  "it  has 
no  reason  for  its  existence,  derived  from  general  observa- 
tion and  experience."  ^  This  concise  statement  summarizes 
the  objections  urged  to  the  doctrine  of  Robinson  v.  Elliott,  and 
furnishes  a  view  upon  which  the  decisions  in  the  eight  dis- 
senting States  may  be  harmonized.  It  is  a  view  no  doubt 
entertained,  in  the  terms  stated,  in  some  of  those  States  ; 
and  it  would  perhaps  be  favored  in  some  other  States  where 
the  question  has  not  been  directly  passed  upon. 

If  these  views  are  correct,  it  is  of  prime  importance  to 
the  profession  that  they  be  so  understood,  and  be  generally 
adopted.  The  concurrence  of  the  adjudications  of  the  courts 
of  fourteen  of  the  States  with  those  of  the  United  States,  if 
at  war  Avith  established  principles  of  jurisprudence,  should 
not  be  allowed  to  have  influence  or  weight  outside  those 
courts ;  but  if  erroneous,  their  errors  should  be  fearlessly  ex- 
posed, and  by  legislation  or  otherwise,  corrected.  It  is 
proper,  therefore,  to  examine  upon  reason  and  principle  the 
objections  presented. 

§  116.  Is  the  doctrine  «ne  of  constructive  or  presump- 
tive fraud?  —  First,  it  is  supposed  that  the  doctrine  of 
Robinson  v.  Elliott,  Collins  v.  Myers  and  kindred  cases  is 

^  Jones  on  Chattel  Mortgages,  sect,  426. 

188 


ceIticisms  upon  the  doctrine  examined.     §   117 

<*  contrary  to  sound  principles  of  jurisprudence."  This 
view  it  is  endeavored  to  substantiate,  by  an  explanation  ot 
the  characteristics  of  constructive  or  presumptive  fraud, 
which  terms  have  commonly,  though  perhaps  erroneously, 
been  used  as  synonymous.  But  here  is  a  fundamental  error. 
The  doctrine  of  Robinson  v.  Elliott  cannot  be  properly 
understood  or  explained  by  reference  to  or  an  explanation 
of  constructive  fraud,  nor  is  it  in  reality  a  doctrine  of  pre- 
sumptive evidence.  It  may  be  suggested  in  advance  that 
this  error  is  responsible  for  the  greater  part  of  the  dissent 
from  that  doctrine. 

In  Brett  v.  Carter,^  frauds  of  the  class  under  discussion 
are  spoken  of  as  "  constructive  or  artificial  frauds."  The 
objection  to  the  doctrine  has  been  urged  that  * 'facts  not 
appearing  upon  the  face  of  the  instrument  are  presumed, 
in  order  to  help  out  this  presumption  of  fraud. ^'  ■  In  Gay 
V.  Bidwell,''  it  was  asked,  "  How  can  any  one,  from  the 
face  of  this  mortgage,  and  without  reference  to  extraneous 
facts,  draw  any  conclusion  whatever,  concerning  either  its 
intent,  or  its  bearing  upon  creditors.  It  would  certainly 
be  valid  under  any  circumstances,  if  there  were  no  creditors. 
It  does  not  appear  from  the  mortgage  that  there  were  any. 
It  would  not  injure  other  creditors  if  they  were  abundantly 
secured.  It  does  not  show  they  were  not.  It  would  not 
be  void  if  they  had  authorized  it.  And  many  other  cases 
might  be  suggested,  showing  that,  without  proof  of  external 
facts,  there  could  be  no  conclusive  presumption  at  all." 
The  dissenting  opinion  in  Griswold  v.  Sheldon^  may  be 
referred  to  for  a  full  discussion  of  the  question  as  one  of 
presumptive  evidence  of  fraud. 

§  117.  Constructive  and  presumptive  fraud  con- 
sidered.—  These  various  criticisms  furnish  illustrations  of 

1  2  Lowell,  458,  3  7  Mjch.  519. 

2  Jones  on  Chat.  Mort,  sect.  419.  *  4  N.  Y.  581. 

189 


§  117   FRAUDULENT  MORTGAGES  OF  MERCHANDISE. 

the  practice  of  setting  up  a  man  of  straw  in  order  to  strike 
him  clown.  Frauds  of  the  class  in  question  are  not  sup- 
posed, by  those  who  expose  and  condemn  them,  to  be  con- 
structive, artificial  or  presumptive  frauds.  The  courts,  in 
declaring  the  fraud  in  such  cases,  do  not  proceed  upon  any 
theory  of  either  construction  or  presumption.  In  Robinson 
V.  Elliott  and  analogous  cases,  the  fraud  is  neither  presumed 
nor  inferred;  it  is  discovered  to  exist,  it  is  exposed,  and  it 
is  then  adjudged.  The  fraud  thus  adjudged  is  said  to  be 
actual. 

Mr.  Bigelow  saj'^s,  in  his  work  on  Fraud,  "  Constructive 
or  presumptive  fraud  is  an  inference  of  law,  not  to 
the  effect  that  an  actual  fraud  has,  in  the  absence 
of  explanation,  been  clearly  proved,  but  either  that 
it  is  probable  that  fraud  was  committed,  or  that  the  existence 
of  certain  things  in  the  relation  or  conduct  of  parties  begets 
a  probability  of  actual  knowledge  of  fraud,  or  what  will  lead 
to  fraud,  on  the  part  of  the  person  complained  of.  The 
fraud  thus  fixed  is  presumptive  only,  and  in  reality  may 
not  have  existed."^  This  is  one  of  the  latest  of  many 
definitions,  in  which  no  difference  is  observed  between 
constructive  fraud  and  presumptive  fraud,  the  expressions 
being  used  interchangeably.  The  terms  there  employed  are 
apt  to  describe  fraud  which  is  proved  by  a  resort  to  presump- 
tive evidence.  There  is  a  constructive  fraud  which  is 
adjudged  by  an  arbitrary  process  of  jurisprudence,  in  cases 
where  the  relations  between  parties  are  so  intimate  that, 
for  reasons  of  public  policy,  no  explanation  or  proof  of 
good  faith  would  be  allowed  to  validate  the  transaction 
inter  partes;  and  in  these  cases,  it  is  scarcely  exact  to  style 
the  fraud  presumptive.  But  without  entering  into  these 
distinctions,  and  using  the  terms  "constructive"  and 
*'  presumptive  "  for  the  present  as  interchangeable,  it  suffices 

1  Bigelow  on  Fraud,  Iviii. 

190 


CRITICISMS    UrOX    THE    DOCTRINE    EXAMINED.       §     118 

to  say  that  the  fraud  in  the  class  of  cases  under  consideration 
does  not  fall  within  the  definition  cited.  It  is  rather  of  the 
class  referred  to  by  the  same  author  elsewhere,  in  these  words  : 
*' In  some  cases,  fraud  is  self-evident;  and  when  so,  it  is 
the  proper  province  of  the  court  to  adjudge  upon  11.'^^  Any 
criticism  in  the  premises,  based  on  considerations  applicable 
to  presumptive  fraud  or  constructive  fraud  must,  therefore, 
in  the  nature  of  the  case,  be  misleading. 

§  118.  Fraud  as  a  question  of  law. — It  is  frequently 
supposed  that  the  term  "fraud  in  law,"  and  the  term 
"constructive  or  presumptive  fraud,"  are  equivalent  ex- 
pressions; and  that  the  terms  "  fraud  in  fact  "  and  "  actual 
fraud ' '  are  also  synonymous .  This  use  of  terms  distinguishes 
the  dissent  from  the  doctrine  in  question,  both  in  the  opin- 
ions of  the  dissenting  courts  and  the  arguments  of  the  dis- 
senting controversialists.  It  is  based  on  the  supposition  that 
"  actual  fraud  "  always  mi\A\Qs  a  fraudident  intent  on  the 
part  of  the  person  complained  of,  or,  in  other  words,  that 
there  can  be  no  "actual"  fraud  without  such  an  intent ; 
and  further,  that  as  such  intent  is  always  a  question  of  fact 
to  be  determined  by  a  jury,  therefore,  "  actual  fraud"  is 
always  a  question  for  a  jury.  Hence  it  is  reasoned  that 
"  actual  fraud  "  is  never,  and  can  never  be,  the  equivalent 
of  "  fraud  in  law,"  but  that  the  latter  is  always  the  equiv- 
alent of  "presumptive  fraud."  It  follows  from  these 
views,  by  easy  transition,  in  regular  logical  processes,  that 
whenever  a  court,  without  the  aid  of  a  jury,  has  adjudicated 
that  fraud  exists,  it  can  be  no  other  than  "  presumptive  or 
constructive  fraud."  These  ideas  colored  the  views  of  the 
court  in  Brett  v.  Carter,'-'  where  it  was  "  supposed  to  be  well 
settled"  that,  in  the  class  of  cases  under  consideration, 
"  the  question  whether  this  was  a  fraud  or  not  was  one  of 
fact  for  the  jury,  excepting  under  a  peculiar  clause  in  the 

1  Big.  on  Fraud,  p.  468.  ^  2  Low.  458. 

191 


§    119       FKAUDULE-NT    .AlOirruAOKs;    OF    MERCHANDISE. 

bankrupt  law  of  England;"  and  where  it  was  thought 
'*  stranjre  that  after  our  Loijislatures  have  met  the  difficul- 
ties  of  Twyne's  Case,  by  requiring  registration,"  and  pro- 
viding that  '*  fraud  shall  be  a  question  of  fact  for  the  jury," 
the  Supreme  Court  of  the  United  States  and  other  courts 
should  hold  such  transactions  to  be  fraudulent  and  void  in 
law.  So  it  has  been  thought  that  "  an  arbitrary  rule,  declar- 
ing void  all  mortgages  of  personal  property  containing  pro- 
visions that  the  mortgager  may  retain  possession  and  sell  in 
the  usual  course  of  business,  must  have  the  effect  of  an- 
nulling very  many  transactions  which  are  without  fraud  in 
fact."^  Those  courts,  therefore,  which  adopt  this  rule, 
have,  in  so  doing,  "  revived  the  old  rejected  doctrine  of 
constructive  fraud  ;  ' '  while  those  which  dissent  from  it 
"  have  adhered  to  the  safe  and  just  rule  that  fraudulent  in- 
tent is  in  all  cases  a  question  of  fact."  "^ 

§  119.  Distinction  between  actual  fraud  and  fraudu-' 
lent  intent. — The  difficulty  in  all  of  these  views  of  such 
transactions  arises  from  a  misconception  of  the  nature  and 
character  of  fraud  as  a  legal  question.  The  classification 
of  fraud  into  "  fraud  in  law  "  and  "  fraud  in  fact "  is  not 
a  happy  one.  The  classification  into  "  actual  fraud  "  and 
"  constructive  fraud  "  is  logical  and  explicable.  But  "  ac- 
tual fraud  "  and  "  fraudulent  intent  "  are  far  from  synon- 
ymous, and  he  who  fails  to  distinguish  between  them  will 
err.  The  term  "fraud"  has  prime  reference,  not  to  the 
intent  or  motive  of  the  party  to  the  transaction,  but  to  the 
inherent  characteristics  ahd  quality  of  the  transaction  itself. 
If  essentially  unreal  or  deceptive,  it  has  in  itself  fraudulent 
features,  and  may  be  characterized  as  a  fraud;  but  the 
"  intent  to  defraud,"  that  is,  the  intent  to  give  the  transac- 
tion a  deceptive  character,  in  order  thereby  to  accomphsh 
deception,  may  or  may  not  have  been  present.     "Actual 

1  Jones  on  Chat.  Mort.,  sect.  418.  *  Id.,  sect.  416. 

192 


CRITICISMS    UrON    THE    DOCTRINE    EXAMINED.       §     119 

fraud"  means  that  which  actually  exists,  whether  deter- 
mined by  a  court  or  found  by  a  jury  ;  and  it  may  frequently 
be,  and  often  is,  found  to  exist  in  the  absence  of  fraudu- 
lent intent.  Wherever  the  intent  to  defraud  becomes  ma- 
terial, in  a  jury  case,  it  is  always  "  a  question  of  fact  for 
the  jury;  "  but  it  by  no  means  follows  that  if  a  court, 
without  a  jury,  finds  fraud  to  exist,  it  is  always  done  upon 
the  theory  of  a  conclusive  presumption.  "  AVhere  the  fraud 
is  self-evident,^'  says  Mr.  Bigelow,  *'  it  is  the  proper  pro- 
vince of  the  court  to  adjudge  upon  it."  ^  In  such  a  case, 
it  is  as  much  fraud  in  fact,  or  actual  fraud,  as  if  some  ques- 
tion had  arisen  for  a  jury  to  pass  upon. 

The  truth  is,  that  fraud  is  in  one  sense  always  a  question 
of  law;  that  is  to  say,  it  must  be  determined  by  a  court, 
as  a  matter  of  law,  upon  the  facts  of  the  case.  In  another 
sense,  fraud  is  often  to  a  certain  extent  a  question  of  fact ; 
that  is  to  say,  facts  must  be  ascertained  upon  which  the 
court  can  base  its  judgment.  There  is,  therefore,  "  fraud 
in  law,"  in  a  certain  sense,  in  all  cases  involving  fraud ; 
and  in  many  of  them  "  fraud  in  fact,"  in  a  certain  sense; 
yet  these  terms  are  in  themselves  so  ambiguous  that  they 
might  well  be  disused.  Cases  involving  fraud  are  readily 
divisible  into  several  classes.  In  one  class,  the  facts  may 
not  disclose  actual  fraud  or  an  intent  to  defraud  ;  yet,  by 
reason  of  the  intimacy  of  the  relations  between  the  parties, 
the  law,  from  public  policy,  arbitrarily  or  by  construction 
sets  aside  the  transaction  as  fraudulent ;  and  this  is  con- 
structive fraud  in  the  strict  sense.  In  another  class,  the 
facts  again  may  not  disclose  actual  fraud  or  an  intent  to  de- 
fraud, yet  either  fraud  or  a  fraudulent  intent  may  be  fairly 
presumed,  so  as  to  shift  the  burden  of  proof;  so  that  in  the 
absence  of  a  satisfactory  explanation,  there  will  be  an  ad- 
judication of  fraud,  which  may  be  classed  as  presumptive 
fraud.  In  another  class  of  cases,  the  intent  of  the  parties, 
or  one  of  them,  may  be  material ;  if,  before  a  jury,  the 

'  Big.  on  Fraud,  468. 

1^  ■      193 


§    119      FRAUDULENT   MORTGAGES    OF    JIERCIIANDISE. 

fact  of  such  intent  is  to  be  determined  by  the  jury;  and  if 
the  jury  find  such  an  intent,  the  judgment  of  fraud  is  then 
pronounced  by  the  court.  In  many  jurisdictions,  a  court 
of  equity  may  determine  the  fact  of  a  fraudulent  intent 
without  the  aid  of  a  jury  ;  or  in  some  jurisdictions,  such 
aid  may  be  invoked  at  the  discretion  of  the  court,  or  at  the 
option  of  a  party  to  the  cause.  In  still  another  class  of 
cases,  the  facts  of  the  case  are  apparent  to  the  court ;  it 
may  bo  upon  the  face  of  a  mortgage,  or  it  may  be  by  the 
admission  of  the  parties  to  the  cause ;  and  without  refer- 
ence to  the  intent  of  any  of  the  parties,  the  court  sees  the 
fraudulent  character  of  the  transaction  as  plainly  as  if  an 
intent  to  defraud  had  been  proven  or  admitted.  Here  the 
duty  of  the  court  seems  plain  and  unavoidable,  to  adjudge 
the  fraud  as  a  conclusion  of  law.  Robinson  v.  Elliott, 
Brett  V.  Carter,  and  kindred  cases  fall  within  this  class.  It 
is  only  those  classes  of  cases  which  must  turn  upon  a  fraud- 
ulent intent,  to  which  statutes  can  apply,  like  those  in  In- 
diana and  Michigan,  which  provide  that  the  question  of 
fraudulent  intent  shall  in  all  cases  be  a  question  of  fact.^ 
It  would  be  impracticable,  if  it  were  desirable,  to  put  all 
cases  involving  fraud  upon  a  Procrustean  bed  of  fraudulent 
intent.  Sometimes,  therefore,  actual  fraud  is  adjudicated 
by  the  court  upon  the  intent  of  the  parties,  irrespective  of 
other  facts,  (as,  for  instance,  the  bona  fides  of  the  indebt- 
edness in  the  case);  and  sometimes,  also,  actual  fraud  is 
adjudicated  by  the  court  upon  the  facts  of  the  case,  irrespec- 
tive of  the  intent  of  the  parties.  All  these  classes  of  cases 
have  been  comprehended  in  the  frequent  declarations  of  the 
courts  that  fraud  is  the  "  judgment  of  the  law  upon  facts 
and  intents.^'  ^ 

1  Kobinson  v.  Elliott,  22  Wall.  513. 

*  Doe  dem.  Otley  v.  Manning,  9  East,  64 ;  Pettibone  v.  Stevens,  15  Conn. 
19 ;  38  Am.  Dec.  57 ;  Beers  v.  Botsford,  13  Conn.  146 ;  Sturtevant  v.  Ballard, 
9  Johns.  337 ;  6  Am.  Dec.  281 ;  Morgan  v.  Elam,  4  Yerg.  438 ;  Worseley  v. 
De  Mattos,  1  Burr.  467  ;  Ilea  v.  Alexander,  6  Ired.  L.  644. 

194 


CRITICISMS   UPON   THE   DOCTRINE    EXAMINED.       §    120 

§  120.   The  law  and  the  facts  in  cases  of  alleged  fraud. — 

A  veiy  full  explanation  of  the  relative  offices  of  the  court 
and  the  jury  in  these  cases  is  given  in  Hughes  v.  Cory/  by 
Judge  Dillon,  who,  it  would  seem,  might  have  applied  his 
own  rules  to  the  case  of  the  mortgage  on  a  stock  of  goods, 
then  under  examination,  but  for  the  controlling  influence 
of  the  Iowa  statutes.  He  says:  "A  mortgage  may  be 
fraudulent  in  fact  because  there  is  no  real  debt ;  or  if  one, 
because  it  is  knowingly  and  purposely  overstated,  to  deceive 
and  keep  off  other  creditors.  When  these  facts  are  proved, 
fraud  is  an  inference  of  law,  and  the  jury  is,  under  the 
direction  of  the  court,  bound  to  find  it ;  or  though  there  be 
a  real  debt,  yet  if  it  can  be  shown  that  the  controlling 
motive  and  object  in  making  and  taking  the  mortgage  were 
not  to  secure  the  debt,  but  to  hold  the  instrument  as  a  shield 
to  protect  the  debtor  from  his  other  creditors,  this  would 
make  the  morto;ao;e  fraudulent.  The  court  should  so  in- 
struct  and  the  jury  so  find.  These  are  merely  instances  of 
actual  fraud,  and  other  cases  may  easily  be  imagined.  Any 
instrument  is  fraudulent  which  is  a  mere  trick  or  sham  con- 
trivance, or  which  originates  in  bad  motives  or  intentions,  — 
that  is,  made  and  received  for  the  purpose  of  warding  off 
other  creditors."  Here  the  learned  judge  refers  to  sham 
contrivances  as  one  class  of  cases  indicating  actual  fraud, 
and  transactions  originating  in  fraudulent  intent  as  simply 
another  class  of  similar  cases,  in  which  the  judicial  duty  is 
the  same. 

The  process  in  the  judicial  mind,  therefore,  in  those  cases 
where  putative  mortgages  of  merchandise  are  declared 
fraudulent,  is  a  familiar  one,  corresponding  to  that  adopted 
in  all  cases  where  self-evident  or  actual  fraud  is  declared  by 
a  court.  If  the  agreement  that  the  mortgao-er  shall  retain 
the  possession,  potential  control,  and  right  of  disposition  of 
the  goods  appear  on  the  face  of  the  mortgage,  the  court,  in 

1  20  Iowa,  399. 

195 


§    121      FRAUDULENT   MORTGAGES   OF   MERCHANDISE. 

exercising  the  duty  of  constraingth.it  instrument,  ascertains 
the  fraud  ;  and  no  further  duty  could  in  such  a  case  be 
assigned  to  a  j\uy  than  to  find  the  fact  of  the  execution  of 
the  instrument,  if  that  were  disputed.  If  such  an  agree- 
ment appears  by  evidence  alinnde,  the  result  is  the  same 
when  the  fact  is  found ;  and  no  further  duty  can  properly 
be  assigned  to  a  jury  than  to  determine  the  fact  of  the 
agreement ;  when  that  fact  is  found,  by  verdict  of  a  Jury  or 
otherwise,  the  judicial  process  is  the  same  as  if  the  fact 
appeared  on  the  face  of  the  mortgage.  In  each  of  these 
cases  the  fraud  is  adjudicated  by  the  court  as  actual,  not 
presumptive  fraud. 

§  121.  Fraud  predicated  of  the  transaction  itself,  rather 
than  of  the  motives  of  the  parties.  —  But  are  the  courts 
right  who  hold  such  a  transaction  to  be  actually  fraudulent  ? 
Inasmuch  as  there  is  no  universal  and  common  definition  of 
fraud,  and  it  seems  difficult  to  secure  one,  it  may  be  that 
this  is  a  question  to  be  determined  simply  by  the  prepon- 
derance of  authority  ;  and  if,  as  has  been  shown,  the  logical 
processes  of  jurisprudence  have  been  properly  employed  in 
reaching  the  result  that  such  a  transaction  is  actually  fraud- 
ulent, the  weight  of  authority,  if  on  that  side,  ought  to 
be  allowed  to  close  the  discussion.  But  the  reasoning 
employed  and  the  elucidation  afforded  by  the  courts  in  ad- 
judicating that  there  is  fraud  in  these  transactions,  seem  suf- 
ficient to  bring  them  within  the  original  definition  of  fraud 
as  deceit  or  covin.  The  question  is,  is  it  an  actual  fraud 
for  A.  to  execute  a  so-called  mortgage  on  his  stock  of  goods 
to  B.,  ostensibly  to  secure  a  debt,  but  reserving  to  himself, 
by  an  arrangement  in  which  B.  participates,  the  power  to 
dispose  of  the  goods  in  the  usual  course  of  trade  at  his  dis- 
cretion? First,  inquiring  in  Avhat  sense  the  word  fraud  is 
used,  we  find  it  applicable  to  the  transaction  between  the 
parties,  rather  than  to  their  intent.  Covin,  in  the  old 
190 


CRITICISMS   UPON   THE   DOCTRINE   EXAMINED.       §    121 

English  law,  according  to  the  definition  given  by  Montague, 
Chief  Justice,  in  1550,  was  *'  a  secret  agreement  deter- 
mined in  the  hearts  of  two  or  more  men  to  the  prejudice  of 
another."^  But  the  word  agreement  as  used  in  this  def- 
inition did  not  necessarily  imply  an  agreement  to  commit 
intentional  deception,  or  an  agreement  to  attempt  prejudice 
to  another.  The  agreement  to  do  the  act  in  question  was 
the  fact  to  be  determined,  and  the  circumstance  that  it 
would  operate  to  the  prejudice  of  another  was  what  made  it 
covinous. 

The  juridical  idea  is  the  same  in  the  adjudications  in  the 
class  of  modern  cases  under  consideration.  The  intent  of 
the  parties  (the  mortgagee  concurring)  is  that  the  mortgage 
shall  operate  in  a  certain  manner.  The  transaction  being 
tested  by  its  characteristics,  it  is  observed  to  be  fraudulent. 
The  mortgage  is  but  nominally  a  mortgage,  for  the  mort- 
gager retains  a  full  power  of  disposal  of  the  property,  and, 
in  the  language  of  Chancellor  Kent,  he  "  sports  with  the 
property  as  his  own."  ^  To  allow  this  transaction  to  stand 
as  a  mortgage  is  to  treat  a  sham  as  a  reality,  and  to  allow  it 
to  operate  as  a  deceit,  for  it  would  furnish  the  mortgager  an 
effectual  shield  against  his  creditors,  while  he  was  exercis- 
ing all  practical  ownership  over  the  goods.  Finding  this 
to  be  the  operation  of  the  transaction,  the  court  adjudges 
it  to  be  a  fraud  ;  and  this  without  inquiring  whether  the 
parties  intended  to  defraud,  or  intended  anything  more 
than  to  do  what  they  actually  did.  Is  this  other  than  an 
actual  fraud?  If  the  character  of  ''fraudulent"  is  im- 
puted to  the  transaction,  and  not  to  the  parties  thereto,  it 
is  difficult  to  conceive  of  a  more  apt  application  of  the 
term.  This,  it  will  be  observed,  is  a  rule  of  jurisprudence, 
or  of  substantive  law%  and  not  a  rule  of  evidence  or  of  mere 
procedure.     No  process  of  presumption  has  been  employed ; 

1  Wimbish  v.  Tailbois,  Plowden,  38  (at  p.  54). 
'  Rigge  V.  Murray,  2  Johns.  Ch.  565. 

197 


§    1'22      FRAUDULENT   MORTGAGES    OF   IMERCHAXDISE. 

but  facts  have  been  found  with  certainty,  to  which  a  definite 
rule  has  been  applied. 

§  122.  The  courts  test  such  mortgages  by  their  char- 
acteristics. —  This  rule  of  testing  the  transaction  by  its 
characteristics,  is  the  one  applied  in  both  the  English  and 
American  cases  already  cited.  It  is  applied  as  a  rule  of  sub- 
stantive law,  based  on  the  unreal  and  deceptive  character  of 
the  transaction,  which  is  held  to  render  the  transaction  fraud- 
ulent. Its  practical  application  in  this  class  of  cases  begins 
with  Twyne's  Case,^  where  one  reason  given  for  the  judg- 
ment of  fraud  was,  "  the  donor  continued  in  possession  and 
used  them  as  his  oivn,  and  by  reason  thereof,  he  traded  and 
trafficked  with  others,  and  defrauded  and  deceived  them." 
Said  Lord  Manstield,  in  a  case  of  this  sort:-  "They  who 
dealt  with  him  trusted  to  his  visible  trade  and  stock ;  they 
Avere  imposed  on  by  false  appearances."  It  was  incon- 
sistent," said  Lord  Kenyon,^  that  the  grantor  should  "  exe- 
cute acts  of  ownership,"  after  having  ostensibly  parted 
with  her  property  to  another.  Such  a  transaction  was  in 
Virginia  held  to  be  "/eZo  de  se;"  "  as  a  security,  naught," 
but  resulting  in  merely  a  personal  security ;  a  reservation 
to  the  grantor  of  a  full  power  of  revocation,  and  therefore 
"  fraudulent  j^^er  se."  *  Such  a  transaction  being  designed 
by  the  parties  to  be  not  operative  between  themselves, 
and  being  necessarily  prejudicial  to  the  rights  of  other 
parties,  the  New  York  courts  pronounce  it  "  conclusively 
fraudulent."  ^  The  Ohio  courts  find  its  only  and  necessary 
effect  to  be  that  of  "  a  ward  to  keep  off  other  creditors."  ^ 
The  Supreme  Court  of  the  United  States  takes   the  same 

'  3  Coke,  80. 

2  Worseloy  v.  DeMattos,  1  Burr.  467. 

3  Paget  V.  Perchard,  1  Esp.  205. 

*  Lang  V.  Lee,  3  Kand.  410. 

5  Eussell  V.  Winne,  37  N.  Y.  591 ;  Southard  v.  Benner,  72  N.  T.  424. 

*  Collins  V.  Myers,  16  Ohio,  547. 

198 


CRITICISMS   UPON    THE   DOCTRINE   EXAMINED.       §    123 

view,  and  says  that  such  a  mortgage  "  is  inconsistent  with 
the  nature  and  character  of  a  mortgage,  is  no  protection  to 
the  mortgagee,  and  of  itself  furnishes  a  pretty  effectual 
shield  to  a  dishonest  debtor  ;"  and  that  at  last  "  it  is  but  an 
expression  of  confidence,  for  there  can  be  no  real  security 
where  there  is  no  certain  lien."  ^  In  Wisconsin,  such  an 
instrument  is  thought  to  be  "  per  se  fraudulent  and  void  in 
law,"  and  "  the  fraud  which  the  law  imputes  to  it  is  con- 
clusive."^ In  Tennessee,  it  is  considered  that  in  such  a 
transaction  there  "  are  such  facilities  for  fraud  that  it  must 
be  held  as  wanting  in  legal  good  faith,  on  the  plain  princi- 
ple that  every  reasonable  man  is  presumed  to  intend  the 
probable  consequences  of  his  own  acts;"  and  "  there  is 
clearly  a  benefit  contracted  for  to  the  grantors,  and  a  preju- 
dice to  the  rights  of  other  creditors."  ^ 

In  short,  to  sum  up  the  whole  argument,  a  mortgage  or 
conveyance  of  this  kind  presents  a  false  appearance,  is  only 
a  pretence  as  a  mortgage,  is  calculated  to  deceive,  cannot 
fail  to  deceive  if  it  be  operative,  furnishes  unusual  facilities 
for  fraud,  reserves  benefits  to  the  grantor,  and  prejudices 
other  creditors.  When  it  thus  appears  that  the  transaction 
is,  in  its  results,  so  fraudulent,  and  so  injurious  to  creditors, 
that  few  transactions  could  be  more  so,  even  where  an  intent 
to  defraud  exists  so  as  to  bring  them  within  the  statute  of 
13  Eliz.,  the  courts  are  as  ready  to  adjudge  the  transaction 
fraudulent  as  they  would  be  if  a  fraudulent  intent  appeared. 

§  123.  Registration  does  not  validate  a  fraudulent 
transaction.  —  It  has  been  sometimes  urged  that  all  the 
fraudulent  characteristics  of  such  a  transaction  are  elimi- 
nated as  soon  as  the  contract  is  reo-istered.  This  arg-ument 
proceeds  on  the  erroneous  supposition  that  constructive 
notice  of  a  fraud  renders  the  fraud  inoperative  ;  and  it  in- 

1  Robinson  v.  Elliott,  22  "Wall.  513.        ^  Blakeslee  v.  Bossman,  43  Wis.  116. 
3  Bank  v.  Ebbert,  9  Heis.  153. 

199 


§    123       FlIAUDULENT    MORTGAGES    OF    MERCHANDISE. 

volves  an  erroneous  understandins:  of  the  office  of  resistra- 
tion  of  chattel  conveyances.  It  is  hardly  to  be  believed 
that  any  court  would  consider  constructive  notice  of  an 
intentional  fraud  as  sufficient  to  purge  the  transaction. 
Suppose  A.  and  B.  to  enter  into  a  written  contract,  one 
stipulation  of  which  provides  that  B.  shall  cheat  C,  and 
then  the  contract  is  registered ;  would  constructive  notice  to 
C.  by  means  of  the  registration  suffice  to  validate  the  trans- 
action between  B.  and  C,  so  that  C.  could  not  avoid  it  for 
the  fraud?  Or  suppose  D.  to  convey  all  his  real  estate  in 
trust  to  E.  for  the  benefit  of  D.'s  wife  and  children,  ex- 
pressing upon  the  face  of  the  deed  that  it  is  to  prevent  F. 
from  levying  his  execution  upon  it ;  would  registration  of 
that  deed  operate  to  prevent  F.  from  having  the  voluntary 
conveyance  set  aside?  Yet  these  are  simply  cases  of  fraud, 
evidenced  by  different  facts.  The  fraud  is  still  fraud,  and 
it  id  adjudged  to  be  such,  in  cases  where  a  mortgager 
of  goods  reserves  the  possession  with  power  of  sale  in 
the  usual  course  of  trade.  The  truth  is  that  the  construc- 
tive notice  given  by  registration  of  chattel  conveyances  is 
designed  to  and  does  operate  only  upon  the  question  of 
possession  of  the  property.  The  distinction  has  been  fre- 
quently pointed  out  by  the  courts,  among  them  the  Supreme 
Court  of  the  United  States  in  Kobinson  v.  Elliott.^  The 
rule  is  the  same  in  England,  under  the  *'  Bills  of  Sale  Regis- 
tration Act."  Mr.  May  says,  in  his  work  on  Fraudulent 
Conveyances :  ^  "Of  course  the  mere  fact  of  due  registration 
of  a  bill  of  sale  under  this  act  does  not  necessarily  make  it 
good  against  creditors;  "  though  "  it  gives  publicity  to  the 
transaction,  and  in  that  way  removes  one  great  element  of 
fraud,"  namely,  that  arising  from  retention  of  ix)ssession 
alone. 

Mr.  May's  treatise  sheds  still  further  light  on  the  subject. 
Judge  Lowell,  in  Brett  v.  Carter,^  referred  to  this  valuable 

1  22  Wall.  513.  2  p,  12O.  ^  2  Low.  458. 

200 


CRITICISMS    UPON    THE    DOCTIIINE    EXAMINED.       §     124 

•work  as  statiiii^  the  law  of  England  to  be,  that  in  the  cases 
under  discussion  the  question  of  fraud  is  always  one  of 
fact.  This  is  taken  from  page  106,  where  Mr.  May  says: 
*'  It  appears,  then,  that  in  all  cases  of  this  nature  the  ques- 
tion of  fraud  or  not  is  a  question  of  fact  for  a  jury."  But 
tho  learned  iiidire  overlooked  the  fact  that  when  usinsf  this 
language  INIr.  May  Avas  speaking  of  that  class  of  cases  where 
the  retention  of  possession  alone  is  claimed  to  be  fraudu- 
lent. What  that  author  says  of  the  law  of  England  as 
affecting  the  class  of  cases  now  under  consideration  will  be 
found  at  page  100,  in  these  words:  "The  rule  seems  to  be 
that  where  there  is  an  absolute  conveyance,  and  the  grantor 
remains  in  possession  in  such  a  way  as  to  be  able  to  use  the 
goods  as  Jiis  oivn,  it  is  always  void  against  creditors,  even 
though  made  on  valuable  consideration."  This  indicates 
that  the  substantive  law  of  England  is  in  accord  with  the 
prevailing  doctrine  in  America. 

§  124.  The  policy  of  allowing  such  transactions  con- 
sidered.—  Second:  Is  the  doctrine  of  Robinson  v.  Elliott 
*'  contrary  to  sound  policy?  "  The  argument  that  it  is  so 
rests  on  the  proposition  that  because  the  statutes  requiring 
registration  of  chattel  mortgages  "  are  a  substitute  for  pos- 
session by  the  mortgagee,  and  repel  all  imputation -of  fraud 
which  would  arise  from  the  want  of  it,"  therefore,  there 
is  no  reason  why  a  reasonable  use  of  the  property  by  the 
mortgager  should  be  prohibited ;  and  that  "  if  the  use  be 
such  that  the  property  is  not  consumed  by  the  very  act  of 
using  it,  there  can  be  no  reasonable  objection  to  allowinor 
such  use."  ^  This  argument  presents  two  difficulties.  It 
does  not  follow  that  because  the  statute  relieves  the  case  of 
all  imputation  of  fraud  so  far  as  concerns  possession  alone, 
it  is  also  potent  to  relieve  as  to  fraud  resulting  from  posses- 
sion with  discretionary  power  of  sale.     To  suppose  so  is  to 

1  Jones  on  Chat.  Mort.,  sect.  380. 

201 


§  125   FRAUDULENT  MORTGAGES  OF  MERCHANDISE. 

disregard   entirely   the    distinguishing   clement   of   such  a 
power  of  sale.     This  feature  of  such  conveyances  is  con- 
trary to  "  sound  policy,"  no  less  than  to  "sound  princi- 
ples of  jurisprudence,"  and  for  the  same  reasons  already 
referred   to  ;  jurisprudence  and  policy  concurring  in  this 
respect.     Again,  it  cannot  be  said  of  a  discretionary  power 
of  sale,  that  it  is  a  use  "  such  that  the  property  is  not  con- 
sumed by  the  A'ery  act  of  using  it,"  for  the  result  under  the 
exercise  of  such  a  power  is  an  effectual  consumption  of  the 
property  so  far  it  concerns  all  creditors  and  their  liens, 
either  present  or  i)rospcctive ;   so  that  a  use  which  implies  an 
unlimited  power  of  sale  is  precisely  equivalent  to  a  use  which 
involves  consumption  of  the  property.     Even  in  Massachu- 
setts, it  is  held  that  if  a  mortorajjer  "  uses  and  consumes  the 
property  in  the  same  manner  as  he  would  have  done  if  no  mort- 
irage  had  been  made , "  Hhc  transaction  is  fraudulent  as  against 
creditors.     In  both  classes  of  cases,  whether  the  grantor 
has  consumed  the  property  or  has  sold  it,  he  has  continued  to 
use  it  as  his  own  ;  in  either  case,  the  property  flies  out  from 
under  the  supposed  lien,  and  is  gone ;  the  debtor  has  appro- 
priated it  to  his  own  use ;  it  is  out  of  the  reach,  not  only  of 
other  creditors,  but  of  the  very  creditor  who,  it  was  pre- 
tended, was  secured;  this  creditor  has,  either  directly  or 
tacitly,  sanctioned  the  arrangement  by  which  the  result  was 
accomplished ;  and  the  pretended  security  has  in  every  such 
case  operated  for  the  benefit  of  the  debtor  alone.     Can 
there  be  any  view  of  sound  policy  which  will  allow  such 
results  to  flow  from  a  conventional  arrangement  between 
debtor  and  creditor?     Or  could  any  sound  policy  do  other- 
wise than  to  condemn  in  advance  all  conventional  arrange- 
ments under  which  such  results  are  probable? 

§  125.  Arguments  in  favor  of  such  a  policy  answered. — 

The  argument  has  been  frequently  pressed  with  earnestness 

1  liobbins  v.  Parker,  8  Met.  117. 
202 


CRITICISMS    UPON   THE   DOCTRINE   EXA3IINED.       §    125 

in  detail ;  but  in  every  instance,  the  answer  to  the  argument 

seems  plain  and  irrefragable.     A  "  good  reason  "  why  the 

mortgager  of  a  stock  of  goods  should  remain  in  possession, 

and  continue  to  make  sales  in  the  usual  course  of  his  trade, 

has  been  assumed  to  be  this,  that  "  he  can  manage  them 

better  than  the  morto-agee  can."  ^     The  answer  to  this  su";- 

gestion  is:   It  is  because  it  is  better,  but  better  only  for  the 

mortgager  himself,  that  jurisprudence  and  policy  interpose 

an  objection.     But,  "  Neither  can  a  trader  or  manufacturer 

stop  his  business  in  order  to  give  security  to  a  mortgagee  of 

his  stock."  ^     Answer:    Then  he   should  not  pretend    to 

"  give  security ;  "  sound  policy,  as  well  as  the  law,  demands 

frankness   and  honesty,  and  reprobates  pretences;  as  the 

trader  or  manufacturer  cannot  in  good  faith  "  give  secur- 
ed o 

ity,"  it  is  fraudulent  to  pretend  that  he  can.  But,  "  It  is 
plain  that  such  a  doctrine  virtually  prevents  a  trader  from 
mortgaging  his  stock  at  any  time  for  any  useful  purpose."  ^ 
Answer:  This  is  a  non  sequitur ;  the  right  to  mortgage  a 
stock  of  goods  for  a  useful  purpose  can  scarcely  be  im- 
paired by  a  rule  which  prohibits  a  mortgage  of  such  goods 
for  a  vicious  purpose.  But,  "  If  he  cannot  sell  in  the  or- 
dinary course  of  trade,  or  only  as  the  trustee  and  agent  of 
the  mortgagee,  he  might  as  well  give  possession  to  the  mort- 
sragee  at  once  and  o-o  out  of  business."  *  Answer:  That  is 
what  the  law  means  by  "  security  "  and  "  mortgage;  "  if 
the  *'  mortgage  "  be  not  a  real  security,  it  is  but  a  sham. 
To  attempt  to  fasten  a  valid  and  certain  lien  upon  goods 
which  may  at  any  moment,  at  the  Avill  of  the  debtor,  fly 
out  from  under  the  lien,  is  to  attempt  a  legal  and  moral  im- 
possibility. To  pretend  seriously  that  such  a  thing  is  possi- 
ble, is  fraudulent.  But,  "  To  hold  that  a  merchant  cannot 
mortgage  his  goods  without  closing  his  doors,  would  be  to 
hold  that  no  mortgage  of  a  merchant's  stock  can  be  made 

1  Jones  on  Chat.  Mort.,  sect.  381.  ^  Brett  v.  Carter,  2  Low.  458. 

2  Ibid.  *  lOid. 

203 


§    12G       FRAUDULENT    MORTGAGES    OF    IMEUCIIANDISE. 

at  all."  ^  Answer:  To  this  objection  it  may  be  replied  that, 
if  what  is  implied  be  added,  viz.:  that  no  mortgage  of  a 
stock  can  be  made  which  shall  continue  it  as  a  stock  in  usual 
trade,  it  then  states  and  illustrates  the  case  exactly,  and 
thus  it  is  no  objection  at  all.  Ko  mortgage  can  be  made  of 
a  merchant's  stock,  which  keeps  his  doors  open  for  the  pur- 
poses of  the  merchant's  business,  because  such  a  transaction 
would  be  inconsistent  with  the  very  character  of  a  mort- 
gage. 

§  126.  Defective  views  of  tlie  subject  illustrated. — A 

good  illustration  of  the  defective  view  of  the  real  question 
which  distinguishes  all  these  objections  to  the  doctrine,  is 
found  in  the  argument  which  was  pressed  upon  the  court  in 
Hedman  v.  Anderson.-  The  trial  court  had  been  asked  to 
charge  the  jury  that  a  mortgage  on  a  stock  of  goods  in 
trade  would  be  vitiated  by  an  agreement,  in  or  out  of  the 
mortgage,  allowing  sales  by  the  mortgager  in  the  usual 
course  of  trade ;  and  that  the  jury  might  consider,  in  de- 
termining the  question,  the  fact  that  such  sales  were  made 
with  the  knowledge  of  the  mortgagee,  and  without  objec- 
tion by  him.  Counsel  for  the  defendant  in  error,  arguing 
to  sustain  the  action  of  the  court  in  refusing  such  instruc- 
tion, said:  — 

♦*  The  substance  of  the  alleo^ed  error  in  the  rulings  of  the 
district  court  is  this  :  that  the  mere  fact  that  the  mortgajjer 
disposed  of  some  part  of  the  property  for  his  own  use,  with 
the  knowledofe  and  without  the  dissent  of  the  morto^aofee, 
did  not  of  itself  render  the  mortgage  void  as  to  the  plain- 
tiff, provided  there  was  no  agreement  in  or  out  of  the  mort- 
gage that  the  property  might  be  so  disposed  of.  This  was 
not  error.  The  cases  do  not  say  so  ;  and  the  proposition 
that  such  an  acquiescence  by  the  mortgagee  necessarily  ren- 

»  Gay  V.  Bidwell,  7  Mich.  519;  Hickman  v.  Perrin,  6  Cold.  135. 
2  6  Neb.  392. 

204 


CRITICISMS   UFOX    THE    DOCTRINE    EXAMINED.       §    126 

ders  his  mortgage  void,  that  it  nullifies  and  makes  worthless 
a  security  valid  and  unassailable  down  to  the  moment  of 
such  permission,  is  untenable  upon  grounds  of  reason.  To 
what  results  would  that  doctrine  lead?  A  mortgage  is  jriven 
for  money  loaned.  There  is  no  intent  to  defraud.  It  con- 
tains no  power  of  sale  or  disposition  by  the  mortgager. 
It  even  says  in  terms  that  he  shall  not  sell,  or  dispose  of,  or 
remove  it,  and  if  he  does  so,  or  attempts  to  do  so,  the 
mortgagee  may  take  possession  and  foreclose.  It  covers 
one  thousand  barrels  of  flour;  but  the  mortgager  takes  one, 
or  ten,  and  uses  them  in  his  family,  with  the  acquiescence  or 
affirmative  permission  of  the  mortgagee.  It  covers  a  stock 
of  goods.  But  the  mortgagee  sees  the  mortgager  sell  a  few 
articles  to  customers,  or  take  a  pound  of  tea  for  his  own 
use,  or  cut  off  a  shroud  to  bury  his  child  in,  and  makes  no 
objection.  Down  to  this  time  his  mortgage  has  been  honest 
and  valid,  and  unimpeachable  by  creditors  or  others  ;  but 
by  this  act  of  silent  acquiescence,  or  positive  consent,  he 
forfeits  all  rights  under  it.  His  security  is  blown  away  with 
all  the  suddenness  and  effectiveness  of  a  dynamite  explosion. 
Yet  the  position  of  plaintiff  in  error  leads  exactly  to  that 
conclusion.  It  rejects  every  test  of  an  intent  to  defraud, 
all  inquiry  as  to  an  agreement  for  a  power  of  disposal,  all 
investigation  as  to  whether  any  wrong  is  being  done  to 
creditors,  and  makes  the  fact  of  any  sale,  any  disposal,  any 
use  of  the  mortgaged  property  by  the  mortgager,  operate 
per  se  to  nullify  and  invalidate  a  security  not  either  void  or 
voidable  at  its  inception." 

Inasmuch  as  the  trial  court  had  been  asked  to  leave  to  the 
jury  the  question  whether  a  single  instance  of  a  sale  of 
goods  by  the  mortgager  would  be  sufficient  proof  of  an 
agreement  to  allow  such  sales,  the  argument  drawn  from 
the  insignificant  character  of  a  single  small  sale  does  not  aid 
in  the  consideration  of  the  question  of  law.  Certainly,  the 
question  whether  the  vicious  agreement  is  sufficiently  proven 

205 


§  127   FRAUDULENT  MORTGAGES  OF  MERCHANDISE. 

is  merely  a  question  of  evidence.  The  important  question 
is,  supposing  it  to  be  well  proven,  what  rule  of  substantive 
law  or  of  sound  policy  applies?  The  argument  above 
quoted,  ill  common  with  all  the  others  on  the  same  side  of 
the  question,  exhibits  a  conspicuous  inattention  to  the  essen- 
tial requisite  of  a  mortgage  of  personalty,  that  it  must  be 
a  certain  security  upon  specific  property ;  and  it  further 
ignores  the  manifest  inconsistency  of  allowing  the  mort- 
gager a  discretionary  power  of  sale  over  the  property. 

§  127.  Characteristics  of  a  Chattel  Mortgage.  —  AVhat  is 
a  morto-aoje?  The  definition  o-iven  by  the  learned  author  of 
the  treatise  on  the  "  Law  of  Mortgages  of  Eeal  Property" 
is  so  succinct  and  clear  that  it  will  doubtless  meet  universal 
approval,  viz.  :  A  mortgage  is  "  a  qualified  conveyance  of 
property,  whereby  the  owner  parts  ivith  it  so  far  as  to  make 
it  a  security  to  his  creditor^  and  his  creditor  holds  it  in  such 
a  way  that  the  owner  may,  hy  equitably  fulfilling  his  obliga- 
tion, have  his  own  again."  ^  Further:  "It  must  clearly 
indicate  the  creation  of  a  lien,  specify  the  debt  to  secure 
which  it  is  given,  and  the  property  upon  which  it  is  to  tal'e 
effect/^  ^  Mutatis  inutandis,  the  same  description  and  con- 
ditions will  apply  to  and  characterize  a  mortgage  of  chattels. 
The  same  author  says  of  this  class  of  conveyances:  *'A 
formal  mortgage  of  personal  property  is  a  conditional  sale 
of  it  as  security  for  the  payment  of  a  debt  or  the  perform- 
ance of  some  other  obligation.  If  the  condition  be  not 
performed  according  to  its  terms,  the  thing  mortgaged  is 
irredeemable  at  law,  though  there  may  be  a  redemption  in 
equity,  or  by  force  of  statute.  Such  a  mortgage  is  some- 
thing more  than  a  mere  security,  j^  *  *  *  operates 
to  transfer  the  legal  title  to  the  tnortgagee,  to  be  defeated  only 
by  a  full  performance  of  the  condition."  ^  Such  a  convey- 
ance differs  from  a  mortgage  of  real  estate  in  respect  of  the 

^  Jones  on  Mortgages,  sect.  8.  *  Id.  sect.  60. 

"  Jones  on  Chattel  Mort.,  sect.  1. 

206 


CKITICISMS   UPON   THE   DOCTRINE   EXAMINED.       §    128 

character  of  the  estate  vested  in  the  mortgagee.  But  in  the 
main  elements  of  a  mortgage,  it  bears  so  close  a  resem- 
blance to  a  mortgage  of  real  estate,  as  fully  to  justify  the 
use  of  the  term  "  mortgage  "  in  describing  it.  Anion o'  these 
elements  are,  a  certain  and  unambiguous  description  of 
specific  property,  and  a  certainty  of  lien ;  and  these  are 
essentials.  To  apply  the  term  to  an  instrument  under  which 
the  owner  of  the  property  gives  his  creditor  no  real  security, 
no  certain  lien,  which  takes  no  effect  upon  the  property  de- 
scribed if  the  grantor  so  wills,  and  under  which  he  may  at 
his  pleasure  recover  the  property  as  his  own,  by  selling  it 
and  pocketing  the  proceeds,  without  fulfilling  his  obligation, 
is  to  disregard  all  the  foregoing  excellent  definitions  of  a 
mortgage,  and  to  make  a  sham  the  equivalent  of  a  reality. 
If  a  chattel  mortgage  having  the  essential  features  of  cer- 
tainty of  property  and  lien  were  suddenly  to  lose  by  any 
means  the  element  of  certainty  of  lien,  it  may  not  be  a  very 
violent  figure  of  speech  to  say  that  the  mortgagee's  security 
"  is  blown  away  with  all  the  suddenness  and  effectiveness 
of  a  d^^namite  explosion."  But  this  is  only  saying  in  an- 
other form  that  the  element  of  certainty  of  security  is 
essential  to  a  mortgage. 

§  128.  Effect  of  a  power  of  sale  reserved  to  tlie 
Mortgag-er. —  One  other  objection  to  the  doctrine  of  Robin- 
son V.  Elliott  is  said  to  be  that  "  it  assumes  a  power  of  dis- 
position in  the  mortgager  such  as  is  never  given,  namely,  a 
powder  to  dispose  of  the  whole  property  at  once ;  whereas 
the  power  of  disposal  in  such  mortgages  is  merely  that  the 
mortgager  may  sell  in  the  ordinary  course  of  trade,"  A 
power  to  sell  the  whole  ' '  might  well  be  regarded  as  render- 
ing the  instrument  void;"  but  permission  to  sell  at  retail  is 
only  **  permission  to  free  small  portions  of  the  goods,  from 
time  to   time,    from  the  incumbrance  of  the  morto^asfe."^ 

^  Jones  on  Chat.  Mort.,  sect.  420. 

207 


§  120   FRAUDULENT  MORTGAGES  OF  MERCHANDISE. 

This  "would  seem  to  be  a  distinction  Avithout  a  difference. 
Permission  to  sell  "  portions,  from  time  to  time,"  is  exactly 
equivalent  to  i)ermission  to  sell,  during  the  entire  lapse  of 
time,  the  whole.  Courts  would  take  judicial  knowledge  of 
the  fact  that  merchants  buy  goods  only  to  sell,  and  that  the 
success  of  their  business  as  a  whole  depends  upon  the  sale 
of  all  their  goods.  Under  the  usual  provisions  of  such 
mortgages,  it  is  intended  that  as  fast  as  "  small  j)ortions  of 
the  goods"  are  freed  from  "the  incumbrance  of  the 
mortgage"  by  sale,  other  goods  are  to  be  purchased,  which 
shall  pass  under  the  incumbrance. 

In  Phelps  V.  Murray,^  it  was  held  by  a  learned  judge  that 
such  a  contract  "  is  against  public  policy,  throwing  open  too 
wide  a  door  for  possible  fraud."  This  view  is,  even  by 
those  who  insist  that  the  doctrine  is  contrary  to  sound  policy, 
admitted  to  be  "  entitled  to  candid  consideration."^  Must 
not  candor  admit  further  that  the  possibilities  of  fraud  under 
such  a  transaction  are  exceedingly  numerous,  and  that  no 
sound  policy  can  tolerate  them  for  this  reason? 

§  129.  Reasons  for  the  existence  of  the  doctrine. — Third  : 
The  foregoing  considerations  serve  to  show,  to  some  extent, 
that  the  doctrine  in  question  has  reasons  for  its  existence, 
derived  from  general  observation  and  experience.  Various 
courts,  both  English  and  American,  when  called  upon  to  deal 
with  such  conveyances,  have  put  upon  record  their  judgments 
as  to  the  operation  of  these  conveyances  in  actual  practice. 
As  observers,  their  reports  of  what  they  have  observed 
are  entitled  to  consideration.  It  has  been  assumed  that  "  as 
a  matter  of  experience  and  observation,  the  courts  wiws^  have 
seen  that  such  mortgages  are  no  more  likely  to  be  fraudulent 
in  fact  than  any  other;  and  they  must  have  seen  that,  in  a 
mercantile  or  manufacturing  community,  if  not  elsewhere, 

1  2  Tenn.  Ch.  746,  per  Cooper,  Chancellor, 
^  Jones  on  Chat.  Mort.,  sect.  423. 

208 


CKITICISMS    UPON   THE   DOCTRINE   EXAMINED.       §    130 

the  doctrine  works  badly. "^  This  assumption  is  not  sup- 
ported by  the  large  majority  of  the  decisions.  In  the  many 
cases  heretofore  cited,  while  the  courts  have  generally  agreed 
that  fraudulent  intent  was  immaterial  to  the  inquiry,  they, 
have  concurred  in  adjudicating  that  the  transaction  is 
actually  fraudulent.  Learned  courts,  as  a  rule,  are  acute 
and  trained  observers ;  and  when  they  not  only  concur  in 
declaring  the  doctrine  in  question  a  salutary  one,  but  state 
further  the  important  facts  which  they  find  to  demand  its 
application  in  particular  cases,  they  may  well  be  taken  as 
furnishing  abundant  reasons  therefor,  derived  from  their 
own  general  observation. 

§  130.  Testimony  of  negative  witnesses. — The  courts 
who  are  unable  to  see  the  fraud  in  such  cases  have  fre- 
quently placed  themselves  in  the  attitude  of  merely  nega- 
tive witnesses.  Judge  Lowell  said,  in  Brett  v.  Carter :  '-^  "  If 
it  be  said  that  this  is  one  of  those  cases  in  which  fraud  is 
a  necessary  result  of  the  deed,  all  I  can  say  is  that  this 
brings  us  to  an  ultimate  fact  of  observation  and  experience, 
2iiid  1  am  unable  to  see  the  necessity.'"  Judge  Story  said, 
in  Mitchell  v.  Winslow :  ^  "I  am  not  aware  of  any  policy  of 
the  law,  or  any  principle  of  law,  which  makes  any  convey- 
ance of  this  sort  invalid  as  to  creditors,  if  they  have  full 
notice,  or  may  have  full  notice  of  it,  by  the  exercise  of  rea- 
sonable diligence.  I  profess  that  /  am  not  able  to  perceive 
any.'''  And  Judge  Dillon,  in  Hughes  v.  Cory,*  after  stat- 
ing argumentatively  the  provisions  of  the  Iowa  statutes  as 
to  attachments  and  receivers,  distinguishing  the  Iowa  prac- 
tice from  that  of  other  States,  and  claiming  that  under  that 
practice  the  mortgage  would  be  no  obstacle  to  other 
creditors  who  might  wish  to  levy  on  the  goods,  said: 
^^  N'or  do  toe  see  that  the  mortgage,  in  the  sense  prohibited 

1  5  Sou.  LawKev.,  p.  661.  s  2  Story,  630. 

2  2  Low.  458.  *  20  Iowa,  399. 

14  209 


§    131       FU AUDI' LENT    r.lOKTGAGES    OF    MEUCHAXDISE. 

by  the  law,  reserves   an  interest  in  or  secures  a  benefit  to 
the  mortgager  at  tlie  expense  of  liis  other  creditors." 

These  are  trained  observers,  wlio  have  not,  liovvever,  been 
able,  as  they  declare,  to  see  the  fraudulent  or  vicious  effect 
of  such  transactions.  ' 

§  131.   Testimony    of   aflarmative    witnesses.  —  On    the 

other  hand,  the  trained  observers  are  numerous  who  pro- 
fess to  have  learned  by  their  own  observation  the  reasons 
for  the  existence  and  the  application  of  this  doctrine.  Mr. 
Justice  Davis  said  of  the  mortgage  investigated  in  Eobinson 
V.  Elliott,^  "  ]Manifest]y  it  was  executed  to  enable  the  mort- 
gagers to  continue  their  business,  and  appear  to  the  world 
as  the  absolute  owners  of  the  goods,  and  enjoy  all  the 
advantages  resulting  therefrom.  There  was  nothing  to  put 
creditors  on  their  guard.  This  long-continued  possession 
and  apparent  ownership  were  well  calculated  to  disarm  sus- 
picion." In  Twyne's  Case,  the  judges  of  the  Star  Chamber 
observed  that  the  donor  continued  in  possession  of  the  goods, 
"  and  used  them  as  his  own,  and  by  reason  thereof  he  traded 
and  trafficked  with  others,  and  defrauded  and  deceived 
them."  Lord  Hardwicke  and  his  associate  judges  saw 
that  such  an  arrangement  under  a  morto-ao-e  "  ogives  the 
mortgager  a  false  credit."^  Lord  Mansfield  thought  tho?>e 
who  dealt  with  the  grantor  under  such  circumstances  "  were 
imposed  on  by  false  appearances."  ^  Mr.  Justice  Buller's 
suppositive  colloquy  between  mortgager  and  mortgagee 
imputes  to  the  latter  the  proposition,  "  Give  me  the  com- 
mand of  the  property,  and  you  shall  have  it  to  hold  out  to 
the  world  and  your  creditors  as  your  own."  ^  In  Lang  v. 
Lee,^  the  court  could  not  "  imagine  a  power  more  com- 
pletely adequate  to  the  destruction  of  the  avowed  purpose 

1  22  Wall.  513.  *  Edwards  v.  Harben,  2  Term,  587. 

2  Kyall  V.  Rolle,  1  Wils.  260.  ^  3  Rand.  410. 
^  Worseley  v.  De  Mattos,  1  Burr.  467. 

210 


CRITICISMS    UPON   THE    DOCTRINE    EXAMINED.       §    131 

of  the  deed  ;  "  which  power  was  described  in  Sheppards  v. 
Turpin^  as  one  by  which  the  grantor  might,  "without  any 
violation  whatever  of  the  express  stipulations  of  the  deed, 
divert  the  whole  of  the  property  to  uses  and  purposes 
wholly  foreign  to  the  leading  object  avowed."  Exercising 
such  a  power  in  another  case,  "  up  to  the  date  of  the  levy 
of  the  execution,  the  grantor  carried  on  his  business  just  as 
he  did  before  the  execution  of  the  deed,  selling  the  goods, 
receiving  the  money,  buying  other  goods,  rendering  no 
account,  but  conducting  his  business  as  if  no  deed  had  been 
executed."  ^  The  New  York  courts  declare  that  "  to  sanc- 
tion a  transaction  like  this  would  open  a  door  to  frauds  in- 
numerable, and  to  an  extent  incalculable;"^  its  effect 
would  be  "  not  to  create  an  absolute  lien  on  any  property, 
but  a  fluctuating  one,  which  should  open  to  release  that 
which  should  be  sold,  and  take  in  what  should  be  newly 
purchased;  "  *  and  "  its  only  operation  must  be  to  the  pre- 
judice of  others."  ®  Such  a  mortgage  is  in  New  IJamp- 
shire  observed  to  be  "like  a  kaleidoscope;"^  and  to  be 
"  practically  effective  only  to  ward  off  the  claims  of  other 
creditors."  ^  If  it  were  maintained,  "  the  morto-ao-er  would 
dispose  of  the  goods  for  his  own  benefit  and  without  paying 
the  mortgage  debt,  and  then  mortgage  the  goods,  obtained 
to  replenish  his  stock,  to  the  same  friend  for  the  same 
debt,  and  so  continue  his  business  and  be  enabled  to  snap 
his  fingers  at  his  other  creditors."^  The  consequences  of 
maintaining  such  transactions  as  valid  "  would  be  most  dis- 
astrous."^ In  Ohio,  such  a  mortgage  was  seen  to  be  "no 
specific  lien,  but  a  floating  mortgage,  which  attaches,  swells 

1  3  Grat.  ,357.  "  Perry  v.  Bank,  27  Grat.  755. 

3  Divver  v.  McLaughlin,  2  Wend.  596,  20  Am.  Dec.  655. 
*  Mittnachti;.  Kelly,  3  Keyes,  407. 

5  Russell  V.  Winne,  37  N.  Y.  591. 

6  Ranlettv.  Blodeett,  17  N.  H.  298,  43  Am.  Dec.  603. 
'  Putnam  v.  Osgood,  51  jST.  H.  192. 

'  Ibid.  9  Ibid. 

211 


§  131   FRAUDULENT  MORTGAGES  OF  MERCHANDISE. 

and  contracts,  as  the  stock  in  trade  changes,  increases  and 
diminiijhes,  or  may  wholly  expire  by  sale  at  the  Avill  of  the 
mortiraircr."  ^  It  was  said  of  such  a  mort<ra<;e  in  Illinois: 
"  If  this  was  not  intended  to  defraud  other  creditors,  it  cer- 
tainly'was  well  calculated  to  do  so,  as  it  placed  all  of  K.'s 
property  beyond  their  reach  for  fifteen  months,  and  enabled 
him  to  carry  on  his  business  with  the  property,  precisely 
as  thouEfh  it  was  not  incumbered."^  Accordinoj  to  the 
observations  of  the  Tennessee  courts,  the  reservation  of  the 
power  of  sale  in  such  a  mortgage  "is  totally  inconsistent 
with  the  rights  of  other  creditors,  and  of  necessity  viti- 
ates "  the  transaction  ;  '^  in  it  there  "  are  such  facilities  for 
fraud,  that  it  must  be  held  wanting  in  legal  good  faith;  "  * 
such  stipulations  "tend  inevitably  to  give  a  fraudulent 
advantaofe  to  the  debtor  over  his  other  creditors;  "^  and 
the  mortgage  "  does  hinder  and  delay  creditors  in  the 
enforcement  of  their  claims,"  "^  w^hile  at  the  same  time  it 
opens  "  too  wide  a  door  for  possible  fraud."  ^  In  Missis- 
sippi, as  in  New  York  and  Ohio,  such  a  mortgage  was 
looked  upon  as  "  a  shifting  lien,  which  took  hold  of  the 
o-oods  on  hand;  and  as  these  were  sold  off,  it  separated 
itself,  but  at  once  fastened  upon  the  note  or  book  account 
owino-  by  the  buyers;  "  and  in  the  meantime,  as  the  trans- 
action appeared  to  the  court,  "the  other  creditors  must 
stand  the  varying  fortunes  of  the  venture,  without  power 
or  right  to  move  against  the  goods  ;  "^  from  which  it  was 
"  manifest  that  the  object  was  not  to  apply  these  things  to 
the  payment  of  the  debts,  but  to  secure  the  debtor  in 
their  possession  and  enjoyment."  ^  The  characteristics  of 
another  such  arrangement  were  seen  to  be  that  it  "was 

1  Collins  V.  Myers,  16  Ohio,  547.  ^  Ibid. 

2  Greenebaum  v.  Wheeler,  90  111.  296.  «  /ji^. 

3  Gait  V.  Dibrell,  10  Yerg.  at  p.  155.  '  Phelps  v.  Murray,  2  Tenn.  Ch.  746. 
*  Bank  V.  Ebbert,  9  Heisk.  153.  »  Harman  v.  Hoskins,  56  Miss,  142. 

9  Bank  v.  Douglas,  11  S.  «&  M.,  at  p.  541. 

212 


CRITICISMS    UPOX    THE    DOCTIIIXE    EXAMINED.       §    132 

antaironistic  to  the  reojular  and  usual  course  of  business, 
tended  to  break  down  commercial  confidence  and  credit, 
and  to  entail  losses  upon  those  who  trusted  their  goods  and 
pro])erty  to  the  retail  merchant;"  which  arrangement  was 
adjudged  to  be  "  fraudulent  as  to  subsequent  creditors, 
as  nuich  so  as  if  it  had  been  contrived  with  that  motive 
and  for  that  object."  ^  The  courts  of  "Wisconsin,  Indiana, 
Pennsylvania,  Connecticut  and  Missouri  have  in  like  manner 
announced,  in  express  terms,  their  respective  observations 
of  the  workinofs  of  such  arrangements  between'  an  embar- 
rassed  debtor  and  his  creditor.  And  the  United  States 
courts  have  given  frequent  confirmations  of  these  observa- 
tions; saying  of  one  such  mortgage  that  it  was  "a  sham, 
a  nullity,  a  mere  shadow  of  a  mortgage,  only  calculated  to 
ward  off  other  creditors  ;  a  conveyance  in  trust  for  the 
benefit  of  the  person  making  it;"^  and  of  others,  that 
they  must  necessarily  hinder,  delay,  and  defraud  creditors.^ 

§  132.  Testimony  of  other  observers.  — Nor  are  the  ob- 
servations of  the  vicious  consequences  resulting  from  such 
attempts  to  qualify  or  limit  the  effect  of  a  mortgage  upon 
chattels  confined  to  those  courts  which  declare  these  arrang-e- 
ments  fraudulent.  Other  courts,  which  entertain  a  different 
view  of  the  substantive  law  of  the  case,  have  professedly 
seen  the  difficulties,  or  some  of  them,  inherent  in  such 
transactions.  In  North  Carolina,  the  following  features 
were  observed  in  a  case  then  under  examination:  *' The 
merchandise  retailed  lost  the  power  of  identity  as  soon  as 
sold.  The  corpus  itself  was  lost  and  destroyed  beyond 
pursuit  or  recovery.  The  power  to  sell  was  the  power  to 
destroy,  and  the  sale  was  the  destruction  and  extinction  of 
the  property."  *     In  Alabama,  one  such  transaction  was  ob- 

1  Hilliard  v.  Cagle,  46  Miss.  309. 

2  Catlin  V.  Currier,  1  Saw,  7. 

3  Re  Burrows,  7  Biss.  526  :  Re  Bloom,  17  N.  B.  R.  425. 
*  Cheatham  v.  Hawkins,  76  N.  C.  335. 

213 


§    132      FEAUDULEXT   MOIITGAGES    OF   MEUCIIANDISE. 

/ 

served  to  be  devoid  of  "  even  the  dubious  merit  of  providing 
that  the  proceeds  of  sales  to  be  made  shall  ])e  paid  over  to  the 
mortgrao-ee  ;"  ^  and  another  was  seen  to  be  "  a  device  to  de- 
fraud  creditors,  and  through  that  medium  to  give  the  debtor 
the  control  and  enjoyment  of  his  property."  ^  It  is  believed 
in  Georgia  that  *'  the  permission  to  give  such  a  mortgage, 
though  a  very  convenient  privilege,  is  one  very  easily  used 
to  commit  fraud."  ^  In  Kansas,  it  is  conceded  that  "  doubt- 
less such  arrangements  are  liable  to  abuse,  and  should 
always  be  closely  scanned."  ^  Even  in  Iowa,  it  is  under- 
stood that  "  if  the  mortgager  is  permitted  to  deal  with  the 
property  as  his  own,  the  mortgage  security  is  not  altogether 
safe  or  certain  ;  much  is  necessarily  left  to  the  honesty  and 
good  faith  of  the  debtor." 

These  deceptive,  misleading,  injurious,  and  vicious  char- 
acteristics, as  seen  in  such  transactions  by  these  numerous 
and  careful  observers,  according  to  their  own  statements, 
furnish  the  sufficient  reasons  for  the  existence  of  the  doc- 
trine of  Robinson  v.  Elliott. 

*  Price  V.  Mazange,  31  Ala.  701. 

2  Smith  w.  Leavitts,  10  Ala.  92. 

3  Goodrich  V.  Williams,  50  Ga.  425. 

*  Frankhouser  y.  EUett,  22  Kas.  127,  31  Am.  Rep.  171. 

*  TorberttJ.  Hayden,  11  Iowa,  435. 

214 


SUPPOSED    QUALIFICATIONS    OF   THE   DOCTRINE.       §    133 


CHAPTEK   IX. 

SUPPOSED   QUALIFICATIONS   OF  THE   DOCTRINE. 

Section  133.  Supposed  qualifications  stated. 

134.  Importauce  of  the  supposed  qualificptions. 

135.  Substantive  law  and  adjective  law. 

136.  The  law  and  che  facts. 

137.  Second  supposed  qualification. 

138.  A  misapplied  criticism. 

139.  A  fundamental  distinction. 

liO.  Further  examples  of  this  distinction. 

141.  Assignee  must  act  in  good  faith, 

142.  Sale  by  mortgager  passes  title. 

143.  Grantee  in  fraudulent  conveyance  acquires  no  rights  there- 

under. 

144.  New  transaction  between  parties  may  be  valid. 

145.  First  supposed  qualification. 

146.  The  qualification  examined. 

147.  The  mode  of  proof  immaterial. 

148.  Legal  intent,  and  intent  to  defraud,  distinguished. 

149.  Legal  intent  at  common  law. 

150.  The  distinction  ovei'looked. 

151.  General  doctrine  as  to  legal  intent, 

152.  Third  supposed  qi;alificatiou. 

153.  Conclusions. 

§  133.  Supposed  qualifications  stated.  —  Notwithstand- 
ing the  clearness  Avith  which  this  doctrine  has  been  enunci- 
ated in  America,  the  numerous  cases  which  iUustrate  its 
fundamental  position  in  our  jurisprudence,  and  the  abun- 
dant reasons  furnished  by  the  courts  for  its  existence,  it  has 
been  gravely  argued  that  this  doctrine  has  been  so  qualified 
by  leading  courts  as  greatly  to  weaken  its  force  and  lessen 
its  value,  if  indeed  it  has  not  been  thereby  emasculated,  in 
the  treatise  mentioned  in  the  preceding  chapter,  the  follow- 

215' 


§  134   FRAUDULENT  MORTGAGES  OF  MERCHANDISE. 

ing  have  boon  stated  as  substantial  qualifications  of  the  doc- 
trine. "  First.  If  the  agroenient  {i.e.,  that  the  mortgager 
may  dispose  of  the  mortgaged  goods  at  discretion)  be  not 
contained  in  the  mortgage  itself ,  the  question  whether  there 
is  any  such  airreement,  and  what  are  the  indications  of  fraud 
arising  from  it,  is  one  for  the  jury.  Second.  If  the  agree- 
ment be  to  sell  for  cash  for  the  benefit  of  the  mortgagee, 
the  mortgage  is  no  longer  conclusively  fraudulent,  but  raises 
only  a  question  of  good  faith  for  the  jury.  Third.  The 
mere  fact  that  the  mortgager  continues  to  sell  the  mortgaged 
goods,  with  the  knowledge  of  the  mortgagee,  is  not  proof  of 
an  agreement  between  the  parties  for  such  sales,  and  does 
not  render  the  mortgage  fraudulent  in  law."  ^ 

§  134.   Importance  of  tlie  supposed  qualifications.  —  It 

is  manifest  that  these,  if  in  fact  qualifications  of  the  doc- 
trine, are  serious  ones,  and  that,  wherever  admitted  or 
recognized,  they  must  tend  to  embarrass  both  the  court 
adjudicating  and  the  attorneys  contesting  any  controverted 
case ;  for  their  effect  would  be  to  rob  the  doctrine  of  all  its 
inherent  vitality  as  a  rule  of  law,  and  virtually  to  emascu- 
late it.  Counsel  cannot  safely  advise  clients  as  to  the  appli- 
cation to  their  cases  of  any  rule  of  law,  with  the  contingency 
in  view  that  the  court  may  abandon  its  function  of  adjudi- 
cation and  relegate  the  whole  case  to  the  jury.  The  accord- 
ant adoption  by  the  courts  of  the  United  States  and  those 
of  fourteen  of  the  States,  of  such  a  rule  of  law,  if  well 
advised,  and  on  clearly  understood  grounds,  M'ould  give  the 
doctrine  strength  and  tend  to  insure  its  permanence.  But 
if  the  doctrine  in  its  integrity  should  receive  only  a  nominal 
or  partial  assent,  in  any  or  all  of  the  courts  named,  and 
were,  in  fact,  frittered  away  by  qualifications  in  this  or  that 
court,  it  would,  to  a  corresponding  extent,  lose  respect  as 
well  as  force.     Both  courts  and  lawyers  are  thus  interested 

1  Jones  on  Chat.  Mort.,  sect.  424. 

'216 


SUPPOSED    QUALIFICATIONS    OF    THE    DOCTRINE.       §     13t) 

in  ascertaining  whether  there  are  any  just  qualifications  to 
the  doctrine  in  question,  and  the  grounds  upon  which  they 
rest,  and  also,  what  is  the  real  effect  of  the  cases  which  have 
been  supposed  to  qualify  it.  This  effect  will  be  best  seen 
by  searching  for  the  underlying  principles  of  those  cases, 
and  observing  the  manner  in  which  those  principles  are 
allowed  to  operate  therein.  This,  again,  will  be  more  fully 
illustrated  by  a  brief  glance  at  the  extent  to  which,  as  well 
as  the  manner  in  which,  those  principles  have  been  allowed 
to  operate  in  other  classes  of  cases ;  cases  which  are  en- 
tirely different  as  to  their  facts,  and  are  analogous  only  as 
being  controlled  by  like  principles. 

To  examine  these  questions  understandingly,  it  will  be 
necessary,  tirst  of  all,  to  observe  the  essential  characteristics 
of  what  are  called  legal  doctrines. 

§  135.  Substantive  law  and  adjective  law. — The  dis- 
tinction between  substantive  and  adjective  law  has  made  its 
way  slowly,  but  apparently  surely,  to  a  recognized  place  in 
jurisprudence.  Doubtless,  it  is  accepted  by  all  students  of 
the  law  who  see  it  clearly,  as  inherent 'and  essential.  Sub- 
.stantive  law  not  only  has  different  aims,  but  is  based  on  radi- 
cally different  principles  from  those  which  underlie  adjective 
law.  The  former  is,  for  obvious  reasons,  intrinsically  more 
permanent  and  continuous,  though  not  perfectly  so  ;  while 
the  latter  is  more  readily  subjected  to  change  and  modifica- 
tion. Jurisprudence  primarily  deals  with  only  the  body  of 
substantive  law ;  while  the  body  of  adjective  law  is  consid- 
ered and  discussed  under  the  general  term  Procedure.  It  is 
only  some  rule  of  jurisprudence,  some  part  of  the  substan- 
tive law,  which  can  be  called,  in  the  strict  sense,  a  legal 
doctrine. 

§  136.  The  law  and  the  facts. — In  all  forensic  contro- 
versies,   two    distinct    elements    are    involved,    which   are 

217 


5  lo7   rUAUDULENT  MORTGAGES  Ot   MEKCHANUISE. 

srpanitely  examined,  namely,  the  law  and  the  facts.  For 
these  purposes  two  distinct  processes  are  employed.  By 
one,  the  state  of  facts  existing  in  the  particular  case 
is  to  be  ascertained  ;  by  the  other,  the  proper  rule  of 
substantive  law  is  to  be  sought  for  and  applied.  First  in 
order  of  time  is  the  ascertainment  of  the  facts  of  the  case ; 
then  follows  the  application  of  the  rule  of  law.  The  result 
of  these  two  processes  is  an  adjudication.  Such  is  the  rec- 
ognized mode  adopted  by  the  judicial  tribunals  of  English- 
speaking  peoples  ;  the  Roman  method  not  being  in  use,  by 
which  authoritative  adjudications  were  made  upon  hypothet- 
ical cases.  The  rules  of  law  newly  deduced  by  this  process 
add  to  the  body  of  our  jurisprudence.  As  it  was  expressed 
by  a  distinguished  jurist:  "  The  law  does  not  consist  of 
cases,  but  of  the  principles  adjudicated  in  those  cases;" 
and  by  another:  "It  consists  of  legal  principles,  lying 
above,  and  beneath,  and  around,  and  amid  the  decisions.'' 
But  all  questions  as  to  the  mode  by  Avhich  the  facts  shall 
thus  be  ascertained,  are  questions,  not  of  jurisprudence,  or 
of  substantive  law,  but  of  procedure  only. 

Thus,  in  all  forensfc  controversies,  different  states  of 
facts  usually  call  for  the  application  of  different  rules  of 
law  ;  and  this  will  always  follow  when  the  difference  in  the 
facts  is  substantial.  It  is,  therefore,  no  disparagement  of 
any  legal  doctrine,  nor  is  it,  in  a  proper  sense,  a  qualifica- 
tion of  it,  to  say  that  it  has  no  application  to  other  states  of 
facts  substantially  different  from  those  in  which  its  appli- 
cation has  become  familiar. 

§137.  Second  supposed  qualification.  —  In  the  case  of 
the  second  supposed  qualification  of  the  doctrine  of  Robinson 
V.  Elliott,  to  wit :  that  requiring  the  proceeds  of  sales  to  be 
paid  to  the  mortgagee  takes  the  poison  out  of  the  infected 
transaction,  it  should  be  remembered  that  in  addition  to  the 
state  of  facts  to  which  that  doctrine  has  been  so  often  ap- 
218 


SUPPOSED    QUALIFICATIONS    OF  THE    DOCTRINE.       §    138 

plied,  there  has  now  been  introduced  a  new  and  substantially 
different  fact,  namely,  that  the  sales  to  be  made  by  the 
mortgager,  whether  in  his  own  name,  or  as  agent  for  the 
trustee  named  in  the  conveyance,  are  to  be  for  the  sole 
benefit  of  the  secured  creditor.  Upon  this  state  of  facts, 
the  new  and  different  legal  proposition  is  announced,  that 
the  stipulation  that  all  sales  shall  be  for  the  benefit  of  the 
mortgagee  renders  the  mortgage  no  longer  conclusively 
fraudulent,  though  it  may  present  a  new  question  of  fact  for 
the  jury.  The  element  of  a  discretionary  power  of  sale,  re- 
served to  the  mortgager,  has  been  eliminated,  and  in  its  place 
is  found  the  substantially  different  element  of  a  power  of  sale 
as  the  mere  a^ent  and  for  the  benefit  of  the  secured  creditor. 
The  application  to  this  state  of  facts  of  the  different  rule 
above  stated,  sustains  the  conveyance.  Both  rules  stand 
well  together,  and  jurisprudence  shows  no  want  of  harmony 
in  adopting  both.  The  new  state  of  facts  supposed  presents 
the  familiar  case  of  a  contract  which  infringes  no  rule  of 
law,  and  which  is  accordingly  sustained.  But  it  is  also 
familiar  law,  that  the  most  innocently  appearing  contract 
may  be  a  cover  for  fraud.  So  the  new  state  of  facts  sup- 
posed may,  perhaps,  present  a  case  calling  for  an  inquiry  as 
to  fraudulent  intent.  If  so,  it  then  presents  "  a  question  of 
good  faith  for  the  jury,"  for  the  question  of  a  fraudulent 
intent  is  one  always  to  be  submitted  to  them.  But  it  would 
be  misleading  to  call  this  "  a  qualification"  of  the  doctrine 
first  referred  to ;  and  it  would  be  erroneous  to  suppose  that 
the  submission  of  this  new  question  to  the  jury  involves  an 
abandonment  of  the  legal  opinion  of  the  court  as  to  the 
substantially  different  case  first  stated. 

§  138.  A  misapplied  criticism. — It  has  been  urged :  "Is 
there  any  the  less  a  trust  between  the  parties,  w'hen  the 
mortgage  provides  that  the  mortgager  shall  apply  the  pro- 
ceeds of  all  sales  to  the  mortgage  debt,  than  there  is  when 

219 


§    138      FRxVUDULENT    MORTGAGES   OF   IMEKCHANDISE. 

it  says  nothing  about  such  application?  The  proceeds  of 
the  sales  are  in  the  niortfjaiz-cr's  hands,  and  the  mortgage 
lien  does  not  cover  tlicni.  If  a  mortgager's  retention  of  a 
power  of  disposal  of  the  mortgaged  goods  is  inconsistent  with 
the  idea  of  a  security,  is  the  inconsistency  any  the  less 
when  the  mortgager  agrees  to  use  the  proceeds,  not  for  his 
own  benefit,  but  for  the  benefit  of  the  mortgagee?  Is  not 
the  distinction  a  mere  shadow?  "  ^ 

This  subtle  criticism  ignores  the  substantial  fact  which 
leads  the  courts  to  sustain  the  cases  referred  to,  as  well  as 
one  of  the  most  substantial  facts  of  tAose  cases  wiiere  the 
transaction  is  declared  fraudulent.  It  is  the  use  of  the  pro- 
ceeds of  sales  by  the  mortgager  on  ]iis  own  account  that 
stamps  such  a  ' '  mortgage  "  as  a  fraud.  It  is  a  trust  between 
the  parties  which  reserves  something  for  the  benefit  of  the 
grantor,  which  is  condemned  by  the  law.  A  trust  between 
the  parties,  which  in  good  faith  gives  all  the  proceeds  of  the 
property  to  the  creditor,  is  not  objectionable.  In  such  a 
case,  "  the  proceeds  of  the  sales  are  "  not  "  in  the  mort- 
gager's hands,"  — that  is,  in  his  hands  alone.  They  are  in 
his  hands  only  as  agent  for  the  mortgagee,  and  are  thus 
really  in  the  hands  of  the  latter,  and  the  mortgage  lien  does 
cover  them.  The  proceeds  of  the  sales  of  the  goods  being 
faithfully  devoted  to  the  payment  of  the  mortgage  debt, 
there  is  no  inconsistency  with  the  idea  of  a  security,  but,  on 
the  contrary,  an  entire  consistency.  Of  course,  in  all  cases 
of  this  class,  an  entire  and  unimpeachable  good  faith  in  con- 
stituting the  mortgager  an  agent  for  the  mortgagee  should 
be  shown ;  and  there  may  frequently  be  presented  questions 
in  this  connection  for  a  jury  to  pass  upon.  But  when  the 
substantial  fact  appears  that  the  proceeds  of  the  sales  of 
the  goods  have  been  fully  and  unequivocally  applied  to  the 
payment  of  the  debt  secured,  then  the  fact  that  the  mortgage 

'  Jones  on  Chat.  Morts.,  sect.  424. 

220 


SUPPOSED    QUALIFICATIOXS    OF   THE   DOCTUINE.       §    139 

has  operated  as  a  valid  and  certain  security  is  beyond 
question.  The  distinction  between  this  case  and  one  wiiere 
the  mortgager  handles  and  uses  the  proceeds  of  sales  for 
his  own  convenience  and  benefit  is  thus  seen  to  be  a  sub- 
stantial one,  and  no  "mere  shadow"  ;  and  the  "  vital  in- 
fringement "  of  the  doctrine,  which  the  critic  imputes  to 
this  distinction,^  disappears  entirely. 

§  139.  A  fuiidaniental  distinction. —  All  cases  in  Avhich  a 
power  of  sale  of  the  goods  l)y  the  mortgager  is  provided  for 
are,  therefore,  to  be  tested  by  the  question  whether  such 
sales  are  to  be  made  in  his  own  behalf  and  at  his  own  dis- 
cretion, and  with  control  of  the  proceeds  reserved  to  him  ; 
or  whether  they  are  to  be  made  solely  in  pursuance  of  the 
trust  as  a  real  one,  that  is,  for  the  benetit  of  the  ffi'antee 
or  mortgagee,  and  with  provision  that  the  proceeds  shall 
be  applied  on  his  debt.  Accordingly,  it  will  be  found  that 
the  courts  which  enforce  the  doctrine  of  Robinson  v.  Elliott 
will  set  aside  the  one  class  of  conveyances  and  sustain  the 
other,  classifying  the  cases  as  they  are  presented  by  the 
application  of  the  test  stated.  A  careful  observance  of 
these  rules  by  the  bench  will  insure  consistency  in  the 
decisions;  and  a  careful  examination  of  them  by  students 
will  obviate  any  confusion  or  misunderstanding  as  to  the 
effect  of  each  decision. 

Conveyances  under  which  it  was  provided  that  the  grantor 
should  have  possession  and  power  of  sale,  virtually  and 
practically,  as  agent  for  the  mortgagee,  or  for  the  trustee 
named  in  the  conveyance,  have  on  this  ground  been  sus- 
tained in  Virginia,^  New  York,^  Ohio,^  New  Hampshire,^ 

1  Jones  on  Chat.  Morts.  sect.  424. 

3  Janney  v.  Barnes,  11  Leigh,  100;  Marks  v.  Hill,  15  Gratt.  400. 

3  Ford  V.  Williams,  24  N.  Y.  359;  Miller  v.  Lockwood,  32.E.  Y.  293. 

*  Kleine  v.  Katzenberger,  20  Ohio  St.  110,  5  Am.  Eep.  630. 

»  Wilson  V.  Sullivan,  58  N.  H.  260;  Barker  v.  Hall,  13  N.  H.  298. 

221 


§  141   FRAUDULENT  MORTGAGES  OF  MERCHANDISE. 

Wisconsin/  Illinois,^  Missouri,"  Inclflana,*  Connecticut/ 
Nebraska,^  and  in  the  United  States  Circuit  Court.'  In 
each  of  these  jurisdictions,  the  contrary  doctrine  of  Rob- 
inson V.  Elliott  is  enforced  in  all  cases  wh(n'e  the  reserva- 
tion to  the  grantor  of  a  discretionary  power  of  sale  calls 
for  the  application  of  that  doctrine. 

§  140.  Further  examples  of  this  distinction.  —  Nor  is 
there  any  real  difference  between  those  cases,  so  far  as 
concerns  the  salient  facts  which  should  control  their  deci- 
sion, and  certain  other  cases  in  Maine,^  Massachusetts,^  and 
lowa,^''  in  which  the  conveyance  was  sustained;  for  in  these 
it  appeared  that  the  possession  and  management  of  the 
business  were,  in  one  way  or  another,  for  the  actual  benefit 
of  the  secured  creditor.  The  crucial  test  of  a  faithful 
application  of  the  proceeds  to  the  secured  debt  would  have 
sustained  these  transactions,  even  in  case  the  courts  of 
Maine,  Massachusetts  and  Iowa  had  favored  the  doctrine 
of  Robinson  v.  Elliott.  Substantially  identical  in  prin- 
ciple are  cases  in  the  English  courts,  involving  general 
assignments  for  the  benefit  of  creditors,  in  which  it  was 
provided  that  the  assignees  might  employ  the  debtor  as 
their  agent  in  disposing  of  the  goods,  and  which  were  on 
this  ground  sustained  as  valid. ^^ 

§  141.  Assignee  must  act  in  good  faith. — As  a  con- 
verse to  this   proposition,  it   has    been   held   that,  under 

1  Fisk  V.  Harshaw,  45  Wis.  665;  Cotton  v.  Marsh,  3  Wis.  221. 

2  Goodheart  v.  Johnson,  88  111.  58. 

*  Hewson  v.  Tootle,  72  Mo.  632 ;  Metzner  v.  Graham,  57  Mo.  404. 
■*  Lockwood  V,  Harding,  79  Ind.  129. 

5  Kendall  v.  Carpet  Co.,  13  Conn.  383. 

6  Book  Co.  V.  Sutherland,  10  Neb.  334. 

'  Hawkins  v.  Bank,  1  Dill.  4G2 ;  Overman  v.  Quick,  8  Biss.  134. 
8  Abbott  V.  Goodwin,  20  Me.  408;  Melod}'  v.  Chandler,  12  Me.  282. 

*  Jones  V.  Huggeford,  3  Mete.  515. 
'0  Adler  v.  Claflin,  17  Iowa,  89. 

"  Janes  v.  Whitbread,  5  Eng.  L.  &  E.  431 ;  Coate  v.  Williams,  9  Id.  481. 

222 


SUPPOSED    QUALIFICATIONS    OF    THE    DOCTRINE.       §     142 

general  assignments,  the  action  of  the  assignees  must  be, 
in  fact,  as  well  as  in  name,  for  the  benetit  of  the  creditors ; 
and  if  in  any  respect  it  is  not  such,  but  is  really  for  the 
benefit  of  the  grantor, — as,  by  continuing  his  business 
generally  and  unduly  in  the  old  way, — the  assignment 
will  be  held  void,  even  although  the  assignees  have  per- 
sonally undertaken  to  execute  it.^  It  will  be  "  regarded, 
in  conscience  and  law,  as  a  fraud."  ■^  On  a  like  principle 
it  is  held  in  Massachusetts  that  if  a  pledgee  permit  the 
})ro})erty  to  remain  in  possession  of  the  pledger,  he  loses 
all  benefit  of  the  pledge.^ 

§  142.  Sale  by  mortgager  passes  title. — Testing  all 
such  cases  by  this  fundamental  question  of  the  discretionary 
control  of  the  mortgager  over  the  mortgaged  propert}',  the 
courts  frequently  find  other  consequences  logically  resulting 
from  the  application  of  this  doctrine.  One  of  these  is,  that 
under  all  sales  made  by  the  mortgager,  the  title  to  the  prop- 
erty will  be  passed,  as  was  suggested  by  the  Virginia  Court 
of  Appeals,  in  the  earliest  American  case,*  a«nd  the  mort- 
gagee will  be  estopped  to  deny  the  title  of  the  purchaser. 
This  necessary  result  from  the  application  of  the  rule  has 
been  frequently  adjudicated.^  Even  in  Massachusetts  and 
Maine,  this  is  recognized  as  a  necessary  consequence  of 
allowing  the  mortgager  to  make  sales  of  the  goods. ^ 


1  Am.  Ex.  Bank  r.Inloes,  7  Md.  380 ;  Owen  v.  Body,  5  Ad.  &  E.  28 ;  Whal- 
lon  V.  Scott,  10  Watts,  237 ;  Doyle  v.  Smith,  1  Coldw.  15 ;  Woodward  v.  Good- 
man, 3  Cent.  L.  J.  43 ;  Eichardson  v.  Marqueze,  59  Miss.  80,  42  Am.  Rep. 
353 ;  Mattison  v.  Judd,  59  Id.  99. 

2  Bank  v.  Inloes,  7  Md.  at  p.  391. 

3  Thompson  v.  Dolliver,  132  Mass.  103. 
*  Lang  V.  Lee,  3  Rand.  410. 

5  Ogden  V.  Stewart,  29  III.  122 ;  Miller  ads.  Pancoast,  29  N.  J.  L.  250 ;  Bank 
V.  Hampson,  L,  R.  5  Q.  B.  Div.  177 ;   Walker  v.  Clay,  42  L.  T.  (n.  s.)  369. 

6  Shearer  v.  Babson,  1  Allen,  486;  Stafford  v.  w'hitcomb,  8  Id.  518;  Hub- 
bard V.  Lyman,  8  Id.  520;  Bank  v.  West,  46  Me.  15. 

223 


§     144       Fl'.ALDULENT    MOKTGAiiES    ()V    MEKCIlANDlSE.    - 

§  143.   Grantoo  in  fraiiduloiit  conveyance  acquires  no 

rijfhts  thereunder.  —  Anothrr  logical  coii.scquonco  from 
tJ;is  doctrine  is,  that  inasmuch  as  the  mortgage  transaction 
is  tainted  with  fraud  by  the  agreement  allowing  discretion- 
ary sales  by  the  mortgager,  the  mortgagee  can,  under  such 
a  conveyance,  acquire  no  rights  in  or  to  the  goods  pretended 
to  be  conveyed;  so  that  his  attempt  to  take  possession  of 
the  goods  under  the  mortgage  so  tainted,  will  in  no  respect 
enhirge  his  rights  or  his  remedies  in  the  premises.  The 
goods  will  remain  subject  to  levy  at  the  suit  of  the  other 
creditors  of  the  mortgager,  though  in  the  possession  of  the 
mortgagee,  if  it  be  a  possession  so  obtained.  Decisions  to 
this  effect  are  numerous.^  The  same  rule  was  applied  in 
one  State  to  a  case  not  involvin";  a  stock  of  goods  in  trade, 
but  in  which  a  conveyance  had  been  declared  void  by  rea- 
son of  fraudulent  intent,  clearly  proved. - 

§  144.  New  transaction  between  parties  may  he  valid.  — 

As  a  converse  to  this  })ro})ositi()n,  it  is  to  be  observed  that 
if,  instead  of  acting  upon  the  invalid  mortgage,  and  assert- 
ing rights  under  it,  the  mortgagee  practically  abandons  the 
mortgage,  and  enters  into  a  new  contract  with  the  mort- 
gager, by  which  he  purchases  the  stock  of  goods,  even 
though  he  do  not  pay  for  them  otherwise  than  by  crediting 
their  value  on  his  debt,  an  entirely  new  and  distinct  state  of 
facts  is  again  presented,  calling  for  the  interposition  of 
different  rules  of  law.  Distinguishing  this  class  of  cases 
from  those  in  which  the  principal  doctrine  is  applied,  may 
be  considered  by  adverse  critics  another  qualification  of  the 


1  Kobinson  v.  Elliott,  22  Wall.  513;  Blakeslee  v.  Kossman,  43  Wis.  116; 
Delaware  v.  Ensign,  21  Barb.  85 ;  Dutcher  v.  Swartwood,  15  Hun,  31 ;  Catlin  v. 
Currier,  1  Sawyer,  7  ;  Stein  v.  Muncb,  24  Minn.  890;  Ee  ^lanly,  2  Bond,  261 ; 
Re  Eorbes,  5  Biss.  510;  Re  Morrill,  2  Saw.  356,  8  N.  B.  R.  117;"  Smith  v.  Ely» 
10  Id,  553. 

2  Janvrin  v.  Fogg,  49  N.  H.  340. 

224 


SUPPOSED    QUALIFICATIONS    OF   THE   DOCTRINE.       §    144 

doctrine,  like  the  supposed  ones  referred  to.  It  is,  however, 
but  the  familiar  case  of  a  new  state  of  facts,  to  which  juris- 
prudence applies  a  different  substantive  rule.  A  mortgagee, 
who  may  have  made  a  fraudulent  agreement  with  his  mort- 
gager, is  not,  under  existing  rules  of  Anglo-Saxon  law,  to 
be  punished  for  his  offence,  otherwise  than  by  an  adjudica- 
tion that  the  fraudulent  transaction  is  a  nullity.  He  re- 
mains a  creditor  to  the  same  extent  as  formerly;  and  he 
may,  by  a  new  transaction  with  his  debtor,  receive  a  pre- 
ference, to  the  same  extent  and  with  the  same  limitations  as 
any  other  creditor. 

In  Robinson  v.  Elliott,^  in  connection  with  the  decision 
that  the  mortgagee  could  not  assert  or  enforce  any  rights 
under  the  mortgage,  it  was  intimated  that  a  new  transaction 
between  the  parties,  by  which  the  goods  should  be  trans- 
ferred and  delivered  to  the  morto;ao;ee,  miji-ht  ^jive  the  latter 
a  new  and  legal  right  to  them.  This  point  has  been  directly 
decided  by  the  courts  of  last  resort  in  four  cases,  arising  re- 
spectively in  Minnesota,^  New  York,^  Mississippi,'*  and  New 
Hampshire.^  It  is  a  logical  conclusion  from  the  circum- 
stances of  the  case,  and  the  legal  relations  and  rights  of  the 
parties  outside  of  the  fraudulent  mortgage.  In  the  New 
York  case  referred  to,  the  court,  finding  that  "  before  any 
creditor  questioned  the  validity  of  the  mortgage,  the  goods 
in  question  were  delivered  into  the  actual  possession  of  the 
plaintiffs,  upon  terms  securing  to  them  the  custody  and  the 
right  of  disposition,  freed  from  any  feature  of  the  kind 
alluded  to,"  held  that,  irrespective  of  the  question  of  their 
rights  under  the  mortgage,  "  this  delivery  of  the  goods  en- 
titled the  plaintiffs  to  receive  and  dispose  thereof,  and  appro- 
priate the  proceeds  in  satisfaction  of  their  own  debt."     The 

1  22  AVall.  513.  ^  Bank  v.  Anderson,  24  Minn.  435. 

s  Brown  v.  Piatt,  8  Bosw.  324. 

*■  Baldwin  v.  Flash,  58  Miss.  593 ;  59  Id.  61. 

6  Petteei'.  Dustin,  58  N.  H.  309. 

15  225 


§  144   FRAUDULENT  MORTGAGES  OF  MERCHANDISE. 

third  of  these  cases  has  been  twice  before  the  Supreme  Court 
of  Mississippi,  by  whom  the  question  was  carefully  con- 
sidered.^ A  deed  in  trust  havinji;  been  ffiven,  convevino:  a 
stock  of  goods,  and  containing  provisions  which  would  have 
rendered  the  deed  fraudulent  under  the  settled  jurisprudence 
of  that  State, "^  the  grantor,  by  a  new  act  of  assignment, 
transferred  the  remaining  goods  to  the  trustee,  for  the 
benefit  of  the  same  creditor ;  and  this  transaction  was  held 
not  fraudulent  per  se  as  to  other  creditors  who  proceeded 
subsequently  against  the  goods.  Though  the  inducing 
cause  to  the  surrender  of  the  goods  was  probably  the  invalid 
trust  deed,  3'et  as  the  transaction  was  not  a  seizure  by  the 
creditor,  under  the  provisions  of  the  deed,  but  was  merely 
"  the  very  frequent  occurrence  of  a  transfer  of  goods  by  a 
debtor  to  pay  his  creditor  whom  he  prefers,"^  it  was  held 
to  be  a  case  determinable  with  reference  to  the  actual  in- 
tent of  the  parties  as  to  the  preference.  An  instruction 
having  been  given  to  the  jury  which  ignored  this  salient 
feature  of  the  case,  the  verdict  against  the  preferred  credi- 
tor was  set  aside,  and  a  new  trial  was  ordered,  to  deter- 
mine the  question  of  the  bona  fides  of  the  preference,  by 
inquiring  into  the  actual  motives  of  the  parties.  On  a 
second  appeal,  the  court  re-affirmed  and  emphasized  the  view 
first  taken  of  the  case,  saying  of  the  surrender  of  the  goods 
by  the  debtor  to  the  trustee :  "If  that  possession  was  sur- 
rendered on  the  one  side,  and  received  on  the  other,  with  the 
honest  intention  of  paying  a  just  debt,  it  w^as  not  made 
fraudulent  by  the  unrecorded  trust  deed  of  the  year  before  ; 
it  could  be  made  fraudulent  only  by  reason  of  some  im- 
proper circumstance  connected  Avith  the  transfer  itself,  or 
because  it  was,  in  the  opinion  of  the  jury,  but  the  consum- 
mation of  a  scheme  devised  and  carried  out  for  the  purpose 

1  Baldwin  v.  Flash,  58  Miss.  593 ;  59  Id.  61. 

^  Harman  v.  Hoskins,  56  Miss.  142  ;  Jojeph  v.  Levi,  68  Miss.  843. 
s  58  Miss.  599. 
220 


SUPPOSED    QUALIFICATIONS    OF   THE    DOCTRINE.       §    144 

of  entrapping  third  persons."^  Therefore,  "it  was  for 
the  jury  to  say,  under  proper  instructions  from  the  court, 
whether  in  so  doi.ig  the  parties  were  then  paying  a  just 
debt,  or  were  consummating  a  scheme  of  fraud,  concocted 
in  the  beginning  or  then  designed,"  ^  The  court  very  per- 
tinently referred  to  the  cases  of  Rowley  v.  Rice,^  Cook  v. 
Corthell*and  Morrow  v.  Reed,^  as  authorities  for  the  con- 
clusion reached.  In  the  first  two  cases,  the  mortgage  Avas 
thought  ineffective  to  cover  after-acquired  goods,  and  in 
the  last  named  case,  there  were  formal  defects  in  the  mort- 
gage ;  but  in  each  case  the  delivery  of  the  goods  by  the 
mortgager  to  the  mortgagee  was  held  ample  to  vest  in  him 
the  title,  irrespective  of  difficulties  as  to  the  mortgage;  so 
while  the  facts  were  different  from  those  in  the  Mississippi 
case,  the  principle  of  law  involved  was  substantially  the 
same. 

In  the  New  Hampshire  case,^  where,  after  such  a  mortgage, 
the  mortgagers,  by  a  transaction  in  the  nature  of  a  pledge, 
turned  over  the  remaining  goods,  with  others,  to  the  mort- 
gagees, and  the  goods  were  then  sold  for  the  benefit  of  the 
latter,  the  transaction  was  sustained  as  against  a  complain- 
ing creditor ;  but  it  was  held  that  if  the  mortgagees  had 
merely  taken  possession  under  the  mortgage  itself,  the 
doctrine  of  Janvrin  v.    Fogg^  would  have  applied. 

These  cases  present  a  novel  phase  of  facts,  in  connection 
with  fraudulent  mortgages  of  merchandise ;  but  the  con- 
clusions reached  in  them  are  thus  seen  to  harmonize  fully 
with  those  presented  in  Robinson  v.  Elliott  and  kindred 
cases. 

The  Missouri  case  of  Greeley  v.  Reading^  indicates  an 
inclination  to  favor  the  same  doctrine.  The  mortgage  in 
this  case  reserved  on  its  face  a  power  of  sale  to  the  mort- 

1  59  Miss.  67.  s  30  Wis.  81. 

""  Id.  66.  6  58  Tsr.  H.  309. 

3  11  Met.  333.  7  Atite,  sect.  143 

*■  11  R.  I.  482 ;  23  Am.  Rep.  518.  8  74  ^Iq^  309. 

227 


§  145   TRAUDULENT  MORTGAGES  OF  MERCHANDISE. 

gagcr,  and  the  case  was  recognized  as  one  which  would 
ordinarily  fall  within  the  rule  announced  in  Weber  v.  Arm- 
strong.^ But  the  new  transaction  between  the  parties,  by 
which  the  mortgagee  had  obtained  possession  of  the  goods, 
was  sustained.  Though  without  a  full  consideration  of  the 
question,  this  was  in  approval  of  the  conclusion  reached  in 
Nash  V.  Norment.-  In  this  case,  the  mortgagee  at  request 
of  the  mortgager  took  the  goods  and  sold  them.  The 
court  thought  the  mortgager  had  "  a  perfect  right  to  pay 
a  creditor,  and  to  protect  Simpson,  -who  had  lent  her  money  on 
the  faith  of  this  mortgage,  by  turning  over  to  him  actual 
possession  of  the  property;"  and  that,  though  the  law 
declared  the  mortgage  "  invalid  as  a  security,"  yet  "  as  a 
transfer  of  possession  took  place  before  any  creditor  ac- 
quired rights  to  this  property,  the  invalidity  of  the  mort- 
gage before  possession  by  the  mortgagee  is  unimportant." 

§  145.  First  Supposed  Qualification. — The  supposed 
qualification  first  above  named,^  Avhich  is  imputed  to  several 
of  the  States  in  which  the  doctrine  of  Robinson  v.  Elliott 
has  been  adopted,  presents  a  partially  but  not  entirely 
correct  statement  of  the  rule  of  law  on  the  subject  in  those 
States.  But  when  correctly  stated,  it  will  be  seen  that  this 
leaves  the  doctrine  still  wholly  unqualified  as  a  rule  of  sub- 
stantive law.  The  error  lies  in  introducing  the  words, 
"what  are  the  indications  of  fraud  arising  from  it"  (^.e., 
the  agreement),  in  stating  the  question  for  the  jury. 
Omitting  these  words,  the  proposition  would  be;  "  If  the 
agreement  be  not  contained  in  the  mortgage  itself,  the 
question  whether  there  is  any  such  agreement  is  one  for  the 
jury;"  and  this  correctly  represents  the  law  in  all  the  four- 
teen States    where  the  doctrine  obtains,*  as  well  as  in  the 

1  70  Mo.  217.  ^  5  Mo.  App.  545.  '  Ante,  sect.  133. 

*  Virginia,  New  York,  Xew  Hampshire,  Ohio,  Illinois,  Wisconsin,  Minne- 
sota, Missouri,  Tennessee,  Mississippi,  Indiana,  West  Virginia,  Oregon  and 
Coloriido. 

228 


SUPPOSED    QUALIFICATIONS    OF   THE   DOCTRINE.       §    146 

<?ourts  of  the  United  States.  But  in  none  of  these  courts  is 
the  question,  "  AVhat  are  the  indications  of  fraud  arising 
from  it?"  left  to  the  jury,  wiiether  the  agreement  appears 
from  the  instrument  itself,  or  from  evidence  aliunde.  It 
is  fundamental  to  the  doctrine  of  Robinson  v.  Elliott,  that 
when  the  fact  of  the  am-eement  is  established,  the  strons; 
leoral  sense  of  the  court  makes  clear  the  indications  of  fraud 
which  arise  from  it,  and  the  judgment  of  the  law  is  })ro- 
nounced  accordingly.  In  those  other  States,  whose  courts 
maintain  the  contrary  doctrine,^  and  disaffirm  the  duty  of 
the  court  to  pronounce  upon  the  fraud,  the  question  of 
"  the  indications  of  fraud  arisino;  from  "  the  ao;reement  is 
one  for  the  jury.  This  is  the  principal  difference  between 
these  respective  classes  of  courts  in  reference  to  this 
subject. 

§  146.  The  qualification  examined. — But  the  rule,  that 
the  fact  of  the  existence  of  the  agreement  must,  in  all  dis- 
puted cases,  be  determined  by  the  jury,  cannot  correctly  be 
considered  a  qualification  of  the  doctrine  of  substantive 
law  applicable  to  the  case,  for  it  is  simply  a  rule  of  proced- 
ure. No  number  of  references  to  this  as  a  rule  of  substan- 
tive law,  can  well  make  it  other  than  a  rule  of  procedure. 
In  all  disputed  cases,  tried  before  juries,  the  facts  are  to  be 
found  by  the  jury.  The  facts  must  be  ascertained  before 
the  court  can  be  prepared  to  apply  the  proper  rule  of  sub- 
stantive law ;  and  the  manner  of  ascertaining  the  facts  is  a 
matter  pertaining  to  procedure  only.  The  process  adopted 
in  the  class  of  cases  under  consideration  is  the  old  and 
familiar  one  which  is  of  general  application  in  all  cases  and 
by  all  courts.  The  facts  of  the  case  are  first  to  be  ascer- 
tained by  the  trier  of  the  facts.  If  the  fraudulent  agree- 
ment appears  on  the  face  of  a  written  instrument,  and  the 

1  Michigan,  Iowa,  Maine,  Massachusetts,  Kentucky,  Kansas,  Alabama,  and 
Texas. 

229 


§  146   FRAUDULENT  MORTGAGES  OF  MERCHANDISE. 

execution  of  that  instrument  by  the  party  charged  is  a  mat- 
ter in  issue,  the  fact  of  such  execution  is  to  be  determined 
by  the  trier  of  the  facts  ;  by  the  jury,  if  there  be  one 
sitting  in  the  case  as  such  trier,  otherwise  by  the  court. 
But  nothing  is  more  common  than  to  dispense  with  the  for- 
mality of  making  proof  of  facts  not  really  in  dispute  ;  a 
familiar  instance  of  which  often  occurs  in  the  case  of  a 
written  instrument.  If,  then,  the  execution  of  the  sup- 
posed instrument  be  an  admitted  fact  (as  it  frequently  is), 
there  is  no  question  for  the  jury  to  pass  upon,  and  all  the 
facts  appear  which  are  necessary  for  the  application  of  the 
rule  of  law.  In  these  cases,  that  is,  cases  in  which  the 
fraudulent  agreement  appears  on  the  face  of  the  instru- 
ment, it  is  often  adjudged  that  the  instrument  is  fraudulent 
per  56,  or  "  upon  its  face;"  language  not  descriptive  of 
any  distinct  or  novel  rule  of  law,  but  quite  pertinent  when 
the  instrument  itself  furnishes  all  the  necessary  evidence 
of  the  fraudulent  agreement.  But  if  such  agreement  does 
not  appear  upon  the  face  of  the  instrument,  but  is  disclosed 
by  evidence  aliunde,  the  fact  of  its  existence  must  be  found 
by  the  jury,  whenever  it  is  the  jury  that  is  the  trier  of  the 
facts.  If  it  be  so  found  by  the  jury,  then  again,  all  the 
facts  appear  which  are  necessary  for  the  application  of  the 
rule  of  law ;  and  the  duty  again  devolves  upon  the  court  of 
declaring  the  fraud.  In  these  cases,  '*  while  the  court  can 
not  pronounce  the  instrument  fraudulent  per  se,  it  can  and 
does  pronounce  the  w^iole  transaction  fraudulent  ^er  se." 
In  both  classes  of  cases,  the  process  is  the  same  ;  first,  the 
facts  are  established,  under  the  exigencies  of  the  particular 
case,  according  to  the  usual  rules  of  procedure  ;  and  then, 
by  the  application  to  those  facts  of  the  proper  rule  of  law, 
an  adjudication  is  reached.  In  the  one  case,  the  instrument 
alone  furnishes  all  the  facts  necessary  for  the  judgment  of 
the  court.  In  the  other,  it  requires  all  the  evidence,  includ- 
ing the  instrument,  to  furnish  the  necessary  facts.  To 
230 


SUPPOSED    QUALIFICATIONS    OF   THE   DOCTRINE.       §    147 

suppose,  as  the  courts  in  Gay  v.  Bidwell  ^  and  Brett  v. 
Carter  -  supposed,  tluit  this  judicial  process  is  in  part  a  re- 
sort to  violent  presumptions,  is  to  misunderstand  the  pro- 
cess. Some  single  fact  or  facts  may,  of  course,  as  in  any 
controverted  case,  be  ascertained  by  presumptive  evidence. 
For  instance,  if  the  mortgager,  being  examined  as  a  witness, 
does  not  deny  that  he  executed  the  instrument,  while  the 
main  contention  is  as  to  other  matters,  it  may  fairly  be  pre- 
sumed that  he  did  execute  it ;  or  if  the  mortgagee  does  not 
prove  satisfactorily  that  the  sales  made  by  the  mortgager 
were  without  his  knowledge  and  against  his  will,  it  may 
perhaps  be  presumed,  as  it  frequently  has  been,  that  he 
knew  and  assented  to  such  sales.  In  such  cases,  the  appel- 
late court  might  be  called  on  to  determine  whether  the  ver- 
dict was  wholly  unsupported  by  the  evidence;  but  this 
would  be  a  question  of  procedure  only,  the  decision  of 
which  could,  of  necessity,  have  no  effect  upon  the  rule  of 
substantive  law,  by  qualification  or  otherwise  ;  nor  in  case 
the  verdict  be  sustained,  would  the  criticism  be  either  just 
or  pertinent,  that  "  facts  not  appearing  upon  the  face  of 
the  instrument  are  presumed,  in  order  to  help  out  this  pre- 
sumption of  frauds  ^  As  before  suggested,  the  judicial 
process  in  such  cases  is  not  a  process  of  either  presumption 
or  construction;  it  is  rather  that  of  adjudication,  by  the 
application  of  a  rule  of  substantive  law  to  proven  facts. 

§  147.  The  mode  of  proof  immaterial.  —  Tt  will  be  im- 
material, then,  to  the  question  of  law,  whether  the  fraudu- 
lent agreement  appear  upon  the  face  of  the  instrument,  or 
be  proven  by  other  sufficient  evidence.  Such  has  in 
general  been  the  view  entertained  by  those  courts  in 
which  the  subject  has  been  discussed.  It  is  true  that 
the    leading  cases    in   Virginia,  West   Virginia,    Colorado 

1  7  Mich.  519.  ^  2  Low.  458. 

3  Per  Lowell,  J.,  Brett  r.  Carter,  2  Low.  458. 

231 


§  147   FRAUDULENT  MORTGAGES  OF  MERCHANDISE. 

and  Mississippi,  in  which  the  doctrine  has  been  applied, 
exhibited  the  fact  of  such  an  agreement  on  the  face  of 
the  instrument ;  ^  while  in  the  leading  cases  in  Ohio  and 
Oregon,  the  agreement  was  proved  aliunde.'^  But  in  New 
York,^  New  Hampshire,*  Illinois,^  Tennessee,^  AVisconsin," 
Minnesota,^  and  Indiana,^  and  in  the  courts  of  the  United 
States,^"  cases  of  both  classes  have  arisen,  and  the  adjudication 
of  fraud,  as  a  rule  of  substantive  law,  has  been  made  indiffer- 
ently in  both.  Frequently,  the  agreement  has  been  found 
on  the  face  of  the  deed,  by  implication.^^  It  is  diflScult  to 
see  any  reason  for  a  distinction  in  this  respect,  or  for  the 
supposition  that  such  distinction  could  be  admitted  other- 
wise than  as  a  question  of  procedure.  Indeed,  the  matter 
has  been  frequently  referred  to  by  the  courts  as  one  in  no 
way  affecting  the  question  of  substantive  law.^^ 

The  ruling  in  Southard  v.  Benner^^  may  be  here  repeated 


1  Lang  V.  Lee,  3  Kand.  410;  Sheppards  v.  Turpin,  3  Gratt.  857;  Kuhn  v. 
Mack,  4  W.  Va.  186;  Bank  v.  Goodrich,  3  Colo.  139;  Harman  v.  Hoskins,  56 
Miss.  142. 

■■2  Collins  V.  Myers,  16  Ohio,  547;  Orton  v.  Orton,  7  Oreg.  478. 

3  Edgell  V.  Hart,  9  N.  Y.  213 ;  Southard  v.  Banner,  72  Id.  424. 

^  Ranlett  v.  Blodgett,  17  N.  H.  298,  43  Am.  Dec.  603 ;  Putnam  v.  Osgood, 
51  N.  H.  192,  52  Id.  148. 

5  Davis  V.  Eansom,  18  111.  396 ;  Barnet  v.  Fergus,  51  Id.  352. 

6  Bank  v.  Ebbert,  9  Heisk.  153 ;  Nailer  v.  Young,  7  Lea,  735. 

"  Place  V.  Langworthy,  13  Wis.  629;  Steinart  v.  Deuster,  23  Id.lZ&. 

8  Stein  V.  Munch,  24  Slinn.  390 ;  Horton  v.  Williams,  21  Id.  187. 

9  Ins.  Co.  v.  Wilcoxson,  21  Ind.  355;  Mobley  v.  Letts,  61  Id.  11. 

10  Smith  V.  McLean,  10  N.  B.  R.  260  (Miss);  Re  Forbes,  5  Biss.  510  (HI.); 
Re  Kahley,  2  Id.  383  (Wis.) ;  Pve  Morrill,  2  Sawyer,  356  (Nev.) ;  Catlin  v. 
Currier,  1  Sawyer,  7  (Oreg.). 

J'  Perry  v.  Bank,  27  Gratt.  755 ;  Harman  v.  Abbey,  7  Ohio  St.  218 ;  Stan- 
ley V.  Bunce,  27  Mo.  269;  Lodge  v.  Samuels,  50  Id.  204;  Garden  v.  Bod- 
wing,  9  W.  Va.  121 ;  Gardner  v.  Johnston,  9  Id.  403 ;  Davenport  v.  Foulke, 
68  Ind.  382,  34  Am.  Rep.  265 ;  Re  Manly,  2  Bond,  261  (Ohio);  Fox  v.  Da- 
vidson, 1  Mackey,  102,  9  Wash.  L.  Rep.  263  (D.  C). 

'2  Edgell  V.  Hart,  9  N.  Y.  213;  Southard  v.  Benner,  72  Id.  42^;  Gardner  v. 
Johnston,  9  W.  Va.,  403;  Perry  v.  Bank,  27  Gratt.  756. 

»3  72  N.  Y.  424. 

232 


SUPPOSED    QUALIFICATIONS    OF   THE   DOCTRINE.       §    148 

as  a  most  succinct  statement  of  the  sfaJits  of  the  doctrine, 
when  considered  in  connection  with  questions  of  procedure. 
**  Whether  the  agreement  is  in  or  out  of  the  mortgage, 
whether  verbal  or  in  writing,  can  make  no  difference  in 
principle.  Its  effect  as  characterizing  the  transaction  would 
he  the  same.  The  difference  in  the  modes  of  proving  the 
nijreemeut  cannot  take  the  sting  out  of  the  fact  and  render 
it  harmless.  If  it  is  satisfactorily  established,  the  result 
upon  the  security  must  be  the  same.  It  is  the  fact  that 
such  an  agreement  has  been  made  and  acted  upon,  that  in 
law  condemns  the  security,  and  not  the  fact  that  it  is 
proved  by  the  instrument  of  suretyship,  instead  of  by  parol 
or  in  some  other  way." 

§  148.  Legal  intent,  and  intent  to  defraud,  distin- 
guished. —  In  this  connection  it  may  be  proper  to  advert  to 
the  fact  that  the  language  sometimes  employed  by  the 
courts  in  announcing  this  rule  of  law  indicates  a  reference 
to  the  question  of  intent  as  one  fundamental  to  the  doctrine. 
Fraudulent  intent  being  always,  in  the  very  nature  of  the 
case,  a  question  of  fact,  even  though  not  made  such  by  any 
statute,  it  is  proper  to  submit  this  question  to  the  jury,  in 
every  case  where  it  is  involved  and  they  are  the  triers  of 
the  facts.  If  then,  the  critic  may  ask,  the  adjudication  by 
the  court  is  based  in  part  upon  the  intent  of  the  parties  to 
the  transaction,  how  can  such  adjudication  be  made  as 
based  on  a  rule  of  substantive  law,  without  invading  the 
province  of  the  jury,  and  violating  to  some  extent  the  right 
of  trial  by  jury?  This  criticism,  which  has  been  sometimes 
made,  is,  it  is  submitted,  rather  verbal  than  substantial. 
It  is  true  that,  in  leading  cases  on  this  subject  in  New  York,^ 
Tennessee,'  Connecticut^  and  Mississippi,*  the  courts  have 
employed  the  element  of  imputed  intent  in  adjudicating  the 

'  Wood  V.  Lowry,  17  "Wend.  492.  ^  Bishop  v.  "Warner,  19  Conn.  460. 

*  Bank  v.  Ebbert,  9  Heiak.  153,  *  Harman  v.  Hoskins,  56  Miss.  142. 

233 


§    148      FRAUDULENT   3IOKTGAGES   OF   MERCHANDISE. 

fraud.  But  it  seems  plain  from  a  careful  consideration  of 
the  expressions  of  these  courts,  in  connection  with  the  facts, 
that  the  intent  imputed  to  the  parties  in  these  cases  is  by 
no  means  identical  with  the  "  dolus  "  or  the  intent  to  de- 
ceive or  defraud,  w^hich  is  the  foundation  of  fraudulent 
intent  when  submitted  as  a  question  of  fact  to  a  jury. 
It  is  a  "  le^al  intent,"  in  the  sense  of  a  conclusion  of  law. 
"A  party  will  be  held  as  intending  the  natural  and  inevita- 
ble effects  of  his  acts  ;  if  his  deed  necessarily  operates  to 
interpose  unreasonable  hindrance  and  delay  to  creditors,  or 
to  defeat  them  altogether,  the  iritent  ivill  be  a  conclusion  of 
laiu.''^  "  It  must  be  held  as  wanting  in  legal  good  faith  y 
on  the  plain  principle  that  every  reasonable  man  is  pre- 
sumed to  intend  the  probable  consequences  of  his  own 
acts."  '^  These  are  but  variations  in  the  mode  of  stating  a 
rule  of  substantive  law.  The  intent  here  referred  to,  if  con- 
sidered merely  as  a  question  of  fact,  is  simply  the  intent 
to  execute  the  instrument,  or  to  engage  in  the  transaction, 
which  is  found  to  possess  such  pernicious  features.  If  this 
intent  be  found  as  a  fact  of  the  case,  the  imputations  above 
stated  follow  as  conclusions  of  law,  as  Avas  expressly  de- 
clared by  the  Supreme  Court  of  New  Hampshire,  in  these 
words:  "  If  a  trust,  inconsistent  with  the  legitimate  pur- 
pose of  a  mortgage,  is  reserved  for  the  benefit  of  the 
mortgager,  and  that  is  proved,  then  a  fraudulent  intent  is, 
Avith  us,  and  in  many  other  jurisdictions,  a  conclusion  of 
laiv.''^  But  that  such  expressions  of  the  courts  have  no 
reference  to  that  "  fraudulent  intent  "  which  is  always  "  a 
question  of  fact  for  the  jury,"  and  which  rests  on  the  actual 
motives  of  the  party  charged,  is  plain  from  the  frequent 
declarations  of  the  same  courts,  that  "  there  was  no  specific 
intent  to  defraud;"^  that  "nothing    more  was  intended 


1  Harman  v.  Hoskins,  56  Miss.  142.    ^  Putnam  v.  Osgood,  51  N.  H.  at  p.  202. 

2  Bank  v.  Ebbert,  9  Heisk.  153.         *  Bank  v.  Ebbert,  9  Heisk.  153. 

234 


SUPPOSED    QUALIFICATIONS   OF   THE   DOCTRINE.       §    149 

than  an  honest  design  to  secure  a  just  debt;  "  ^  that  "  the 
act,  in  a  moral  view,  was  entirely  fair;  "^  and  that  the  ar- 
rangement was  not  made  "  with  a  fraudulent  scheme  and 
purpose  to  defeat  existing  or  future  creditors."  ^  To  the 
same  effect  that  the  actual  intent  or  motive  of  the  parties  is 
immaterial  to  the  inquir};^,  and  that  there  is  no  question  of 
intent  in  such  a  case  to  be  submitted  to  a  jury,  are  fre- 
quent cases  in  Pennsylvania,*  New  York^  and  Missouri,^ 
and  others  in  AYisJconsin,"  New  Hampshire'^  and  Indiana.^ 

§  149.  Legal  intent  at  common  law. — The  "legal" 
intent  thus  observed  as  frequently  an  element  in  modern 
fraud,  is  the  same  intent  which  was  seen  at  an  early  day 
to  be  involved  in  the  ancient  "  covin,"  the  prototype  of 
our  modern  fraud.  Each  of  these  terms,  "  covin "  and 
"  fraud,"  is  primarily  applicable  to  and  descriptive  of,  not 
the  intent  or  motive  of  the  parties  to  the  transaction,  but 
the  inherent  characteristics  and  quality  of  the  transaction 
itself.  If  essentially  unreal  or  deceptive,  or  having  in  itself 
fraudulent  features,  it  may  be  characterized  as  a  fraud ;  and 
there  may  or  ma}^  not  have  been  an  intent  on  the  part  of  the 
parties  to  give  it  that  deceptive  character,  or  to  accomplish 
deception  by  means  of  it.  Covin,  according  to  the  definition 
previously  referred  to,^*^  given  in  1550,  was  "  a  secret  agree- 
ment determined  in  the  hearts  of  two  or  more  men,  to  the 

1  Gait  V.  Dibrell,  10  Yerg.  at  p.  155. 

2  Harman  v.  Hoskins,  56  Miss.142. 

s  Billiard  v.  Cagle,  46  Miss.  309  (  at  p.  337). 

*  Welsh  V.  Bekey,  1  Penn.  57 ;  Clow  v.  Woods,  5  S.  &  R.  275,  9  Am.  Dec. 
346 ;  McKibbin  v.  Martin,  64  Pa.  St.  352,  3  Am.  Rep.  588. 

5  Russell  V.  Winiie,  37  K  Y.  591 ;  Wood  ■;;.  Lowry,  17  Wend.  492;  Mars- 
ton  V.  Vultee,  8  Bosw.  129. 

6  State  V.  Tasker,  31  Mo.  445;  Brooks  v.  Wimer,  20  Mo.  603.  ' 
'  Blakeslee  v.  Rossman,  43  Wis.  116. 

8  Putnam  v.  Osgood,  52  N.  H.  148. 

9  Mobley  v.  Letts,  61  Ind.  11. 
'"  Ante.  sect.  121. 

235 


§    149      FRAUDULENT   MORTGAGES    OF   JIERCHANDISE . 

prejudice  of  another."  ^  But  this,  as  before  suggested,  did 
net  necessarily  imply  an  agreement  to  commit  intentional 
deception,  or  an  agreement  to  attempt  prejudice  to  another. 
The  agreement  to  do  the  act  in  question  was  the  fact  to  be 
determined,  and  the  circumstance  that  it  Avould  operate  to 
the  prejudice  of  another  was  what  made  it  covinous.  This 
appears  from  other  views  expressed  by  the  same  judge  in 
the  same  case;  for  in  answer  to  the  contention  that  the 
complaining  party  must  prove  the  intent  to  deceive  and 
defraud,  he  said:  "Inasmuch  as  covin  is  a  secret  thing, 
whereof  by  intendment  of  law  a  stranger*  cannot  have 
knowledge,  for  this  reason  the  law  will  not  force  a 
stranger  to  show  the  cause  thereof."  It  was  held,  also, 
that  there  might  be  both  "covin  apparent,"  and  "covin 
not  apparent;  "  and  that  if  the  covin  relied  on  were 
"  covin  apparent,"  it  might  well,  as  a  matter  of  procedure, 
be  proven  under  a  general  averment  of  covin  in  the  plead- 
ings. So,  in  a  note  by  Lord  Hale  to  Coke  upon  Littleton, 
it  is  said:  "The  covin  is  apparent,  though  it  was  not 
found," '^  That  is  to  say,  the  facts  of  the  case  being 
apparent,  or  being  found,  the  covin  was  apparent,  though 
no  intent  to  defraud  or  deceive  was  proved.  The  character 
of  the  transaction  being  apparent,  no  other  intent  need  be 
proven  than  the  intent  to  engage  in  the  transaction;  the 
law  would  then  impute  to  this  intent  all  its  necessary  con- 
sequences, and  the  result  would  be  "  covin  apparent." 

It  is  in  precise  analogy  to  this  line  of  thought  that  the 
American  courts,  in  the  cases  above  cited,  have  spoken 
of  the  intent  to  engage  in  the  transaction  complained  of  as 
a  "legal  intent,"  in  which  all  the  possible  consequences 
of  that  act  were  necessarily  involved.  And  so,  in  a  recent 
treatise  on  Chattel  Morts^ao^es,  the  doctrine  is  taught  in 
general  terms,  that  the  intent  to  do  an  act  which  will  have 

1  Wimbish  v.  Tailbois,  Plowd.  38  (at  p.  54).  «  Cq,  Lit.  59a,  note  4. 

23G 


SUPPOSED    QUALIFICATIONS    OF   THE   DOCTRINE.       §    151 

a  fraudulent  effect  constitut-es  a  legal  fraud,  "although 
neither  of  the  parties  to  the  mortgage  had  the  intention 
of  perpetrating  a  legal  fraud."  ^ 

§  150.  The  distinction  overlooked.  —  It  was  probably 
in  intended  deference  to  such  judicial  expressions  con- 
cerning the  legal  or  imputed  intent  in  these  cases,  that 
the  Supreme  Court  of  North  Carolina  was  led  to  leave  the 
determination  of  the  question  of  fraud  in  this  class  of  con- 
veyances so  much  to  the  discretion  of  the  jury  as  it  has 
done  in  recent  cases. -^  Perhaps,  also,  similar*  considera- 
tions influenced  the  courts  of  Maine,  Texas  and  Alabama 
in  abandoning,  to  so  great  an  extent  as  they  have  done, 
judicial  opinion  on  the  subject.^  Reflection  must,  how- 
ever, assure  the  student  of  the  principles  underlying  these 
cases,  that  the  question  of  fraudulent  intent,  as  one  of 
fact,  is  not  logically  involved  in  them,  the  other  patent 
facts  appearing  which  have  been  before  mentioned ;  that 
such  judicial  references  to  intent  by  no  means  enlarge  the 
province  of  the  jury,  or  limit  the  duty  or  responsibility 
of  the  court;  and  that  when  the  facts  are  made  clearly 
apparent,  in  whatever  manner,  jurisprudence  has  a  substan- 
tive rule  therefor,  the  application  of  which  is  demanded  by 
both  principle  and  policy. 

§  151.  General  doctrine  as  to  legal  intent. — In  this 
respect  there  is  neither  novelty  nor  singularity,  in  either 
the  doctrine  itself  or  the  mode  of  its  application.  In  many 
other  cases  of  alleged  fraud  in  business  or  other  transac- 
tions, similar  language  is  used  by  the  courts,  a  similar 
process  is  employed,  and  a  similar  fixed  and  substantive 

1  Jones  on  Chat.  Mort.,  sect.  338. 

2  Cheatham  v.  Hawkins,  76  N.  C.  335,  80  Id.  161 ;  Holmes  v.  Marshall,  78 
Id.  262 ;  Boone  v.  Hardie,  83  Id.  470. 

3  Qoogins  V.  Gilmore,  47  Me.  9 ;  Johnson  v.  Thweatt,  18  Ala.  741 ;  Rey- 
nolds V.  Welch,  47  Id.  200;  Scott  v.  Alford,  53  Tex.  82. 

237 


§  151   FKAUDULEXT  MORTGAGES  OF  MERCHANDISE 

rule  of  jurisprucleDce  is  applied.  A  few  instances  may 
suffice  to  illustrate  the  generality  of  the  rule  and  the  prac- 
tice; and  Michigan  herself,  whose  courts  demur  to  the 
doctrine  of  Robinson  v.  Elliott,  furnishes  one  of  the  most 
clear  and  succinct  statements  of  the  rule.  Said  Chancellor 
Farnsworth  :  "By  the  term  fraud,  it  should  be  remem- 
bered that  the  legal  intent  and  effect  of  the  acts  complained 
of  is  meant.  The  law  has  a  standard  for  measuring  the 
intent  of  parties,  and  declares  an  illegal  act,  prejudicial  to 
the  rights  of  others,  a  fraud  upon  such  rights,  although 
the  parties  deny  all  intention  of  committing  a  fraud."  ^ 
And  this  view  was  re-affirmed,  on  appeal,  by  the  Supreme 
Court,  which  found  the  transaction  fraudulent,  without 
"imputing  to  the  highly  respectable  parties  in  this  case 
a  premeditated  or  Avicked  intention  to  destroy  or  injure  the 
interest  of  the  complainant."  ^  In  Maine,  also,  this  doctrine 
is  distinctly  announced  in  Wheelden  v.  Wilson,^  a  case  of  a 
mortgage  on  goods  in  trade,  the  validity  of  which  was 
questioned  by  an  attaching  creditor,  but  in  which  the  ques- 
tion of  a  reserved  power  of  sale  is  not  considered.  Said 
the  court :  "  It  may  not  have  been  the  intention  of  either 
the  mortgagee  or  mortgager  to  perpetrate  a  moral  fraud  ; 
they  may  have  intended  to  act  for  the  benefit  of  all  the 
creditors  of  the  mortgager;  but  that  they  both  intended  to 
place  the  property  mortgaged  beyond  the  reach  of  legal 
process,  and  thereby  to  delay,  if  not  to  defeat  creditors, 
we  think  the  case  clearly  shows.  This  constitutes  a  legal 
fraud."  Mutatis  mutandis^  this  precise  criticism  might 
have  been  applied  to  the  same  case  by  other  courts,  who 
would  lay  stress  on  the  fact  that  the  parties  "  both  intended 
to  reserve  to  the  mortgager  the  potential  control  of  the 
goods,  and  thereby  to  delay  creditors. 

1  Kirby  v.  Ingersoll.  1  Harr.  Ch.  172  (p.  191). 

2  1  Doug.  (Mich.)  477  (1844).  '  44  Me.  11. 

238 


SUPPOSED    QUALIFICATIOXS    OF   THE    DOCTRINE.       §     151 

In  New  York,  the  rule  was  announced  as  follows  :  "  The 
Statute  of  Frauds  (2.e.,  13th  Eliz.)  refers  to  a  legal,  and 
not  a  moral  intent;  that  is,  not  a  moral  intent  as  contra- 
distinguished from  a  legal  intent.  It  supposes  that  every 
one  is  capable  of  perceiving  what  is  wrong,  and  therefore, 
if  he  do  what  is  forbidden,  intending  to  do  it,  he  will  not 
be  allowed  to  say  that  he  did  not  intend  to  do  a  forbidden 
act.  A  man.'s  moral  perceptions  may  be  so  perverted  as  to 
imagine  an  act  to  be  fair  and  honest,  which  the  law  justly 
pronounces  fraudulent  and  corrupt ;  but  he  is  not  therefore 
to  escape  from  the  consequences  of  it.  "  ^  This  doctrine,  it 
will  be  observed,  was  announced  in  view  of  the  New  York 
statute,  which,  like  those  of  Michigan,  Indiana,  and  other 
States,  made  the  question  of  fraudulent  intent,  in  all  cases, 
a  question  of  fact  and  not  of  law.  The  distinction  was 
again  taken  in  Goodrich  v.  DoWns,'-^  that  the  question  of 
intent  to  be  left  to  the  jury  under  such  a  statute,  was  a 
wholly  different  question  from  that  of  fraud  which  the  court 
would  find  inherent  in  any  trust  conveyance  reserving  a 
benefit  to  the  grantor.  And  to  the  same  effect  are  the  earlier 
case  of  Cunningham  v.  Freeborn^  and  the  later  one  of 
Dunham  v.  Waterman.*  In  Pennsylvania,  where  the  estab- 
lished rule  is  that  retained  possession  alone  suffices  to  make 
a  conveyance  fraul^ilent,  it  was  suggested  as  early  as  1809, 
that  a  legal  intent  was  imputed  in  such  cases,  though  the 
actual  intent  might  be  entirely  wanting.^  The  same  view 
is  apparent  throughout  the  long  line  of  Pennsylvania  cases 
on  the  subject,  having  been  in  1872  declared  to  be  "  ele- 
mentary law  in  the  Commonwealth,"  and  "  a  rule  of  uni- 
versal application."  *  In  Illinois,  it  was  said  of  a  conveyance 
of  real  estate,  impeached  for  fraud:  "  It  is  not  important 

1  Grover  v.  Wakeman,  11  Wend.  187  (at  p.  225.) 

2  6  Hill,  438.  3  11  Wend.  240.  *  17  N.  Y.  9.      • 
6  Wiltu.  Franklin,  1  Binn.  502,  2  Am.  Dec.  474. 

«  Garnian  v.  Cooper,  72  Pa.  St.  32. 

239 


§    151       FRAUDULENT    3I0RTGAGES    OF    MERCHANDISE. 

what  further  may  have  been  intended  by  Thomson  and 
Power,  if  tliey  intended  Thomson  should  retain  a  secret  use 
in  the  property.  They  may  not  have  intended  that  this 
should  hinder  or  delay  creditors.  Its  legal  effect,  however, 
is  to  hinder  and  delay  them,  and,  therefore,  the  convey- 
ances are,  under  the  statute,  fraudulent  and  void  as  to 
creditors."  ^  In  other  cases,  it  was  again  said  that  "  it  is 
not  important  what  motives  may  have  animated  the  parties, 
if  they  have  so  disposed  of  the  property  that  tJie  necessary 
effect  is  to  hinder  and  delay  creditors."  ^  So,  in  Tennessee^ 
in  a  case  of  a  voluntary  conveyance  of  land,  it  was 
Baid:  *'  It  will  be  presumed  that  a  party  intends  the  proba- 
ble consequences  of  his  own  act."  ^  And  in  Missouri,  in  a 
case  of  an  assignment  of  goods  to  preferred  creditors,  it 
was  said:  *' Every  man  must  be  presumed  to  intend  the 
necessary  consecjuences  of  his  act."  ^ 

The  same  views  are  entertained  in  England,  where  a  clas- 
sification of  fraud  is  adopted,  which  divides  it  into:  First 
legal  fraud,  in  which  there  may  be  a  false  representation,  but 
without  any  dishonest  intention ;  and  second^  moral  fraud, 
which  rests  in  knowledge  of  the  falsity,  and  in  dishonest  in- 
tention.^ In  Graham  v.  Chapman^  it  was  said:  "Every 
person  must  be  taken  to  intend  that  which  is  the  necessary 
consequence  of  his  own  act ;  and  if  a  trader  make  a  deed 
which  necessarily  has  the  effect  of  defeating  or  delaying  his 
creditors,  he  must  be  taken  to  have  made  the  deed  with 
that  intent."  In  Mining  Co.  v.  firant,^  Jessel,  M.  K. ,  said : 
"A  man  may  commit  a  fraud  without  believing  it  to  be  a 
fraud,  that  is,  without  believing  it  to  be  a  fraud  for  which 
he  can  be  held  responsible  in  law ;  but  the  question  is,  what 
has  his  belief  to  do  with  it?  " 

1  Power  V.  Alston,  93  111.  587. 

2  Moore  v.  Wood,  100  111.  451 ;  Phelps  v.  Curts,  80  111.  109. 

3  Spence  v.  Dunlap,  6  Lea,  457.  *  Bigelow  v.  Stringer,  40  Mo.  195. 
6  Indermaur,  Principlesof  the  Common  Law,  217. 

«  12C.  B.85.  '  17Ch.  D.122. 

240 


SUPPOSED    QUALIFICATIONS    OF   THE   DOCTRINE,       §    152 

In  Spackman  v.  Evans, ^  Lord  Cranworth  said:  "  I  do 
not  attribute  moral  fraud  to  the  appellant,  but  the  whole 
transaction  was  fictitious."  And  in  Mining  Co.  v.  Smith,^ 
Lord  Cairns  said:  "  I  apprehend  it  to  be  the  rule  of  law, 
that  if  persons  take  upon  themselves  to  make  assertions  as 
to  which  they  are  ignorant  whether  they  are  true  or  untrue, 
they  must,  in  a  civil  point  of  view,  be  held  as  responsible 
as  if  they  asserted  that  which  they  knew  to  be  untrue." 

It  might,  in  view  of  the  foregoing  considerations,  be  a 
safer  practice  for  courts  to  discriminate  more  carefully  than 
has  been  habitual,  in  their  use  of  the  term  *'  intent,"  and 
to  distinguish  in  each  case  between  an  intent  to  deceive  or 
defraud  others,  and  an  intent  to  do  acts  which  may  have  a 
like  prejudicial  effect  though  not  so  intended.  But 
whether  these  distinctions  are  or  are  not  taken  in  terms  in 
the  decisions,  it  should  not  by  the  student  be  overlooked 
that  they  in  fact  exist.  Observing  them,  he  will  more 
readily  keep  in  mind  the  proper  province  of  the  court  in  all 
such  cases,  and  be  less  likely  to  confound  rules  of  substan- 
tive law  with  canons  of  procedure,  or  to  suppose  that  the 
latter  can  ever,  in  a  proper  sense,  qualify  the  former. 

§  152.  Third  supposed  qualification. — What  has  been 
already  said  illustrates  sufficiently  the  fallacy  involved  in 
the  third  supposed  qualification  of  the  doctrine.^  Whether 
"the  mere  fact  that  the  mortgager  continues  to  sell 
the  mortgaged  goods  with  the  knowledge  of  the  mort- 
gagee" furnishes  sufficient  proof  of  an  agreement  be- 
tween the  parties  for  such  sales,  is  at  best  but  a  question 
of  evidence,  and  pertains  to  the  adjective  rather  than 
to  the  substantive  law  of  the  subject.  When  so  con- 
sidered, the  "mere  fact"  of  course  does  not  of  itself 
"  render  the  mortgage  fraudulent  in  law."     From  the  gen- 

1  L.  R.  3  Eng.  &  Ir.  App,  171  (at  p.  189). 

»  L.  R,  4  Eng.  &  Ir.  App.  64.  3  gge  anie,  sect.  133. 

IG  241 


§  153   FUAUDULENT  MOUTGAGES  OF  MERCHANDISE. 

eral  process  employed  in  adjudication,  in  most  courts,  it 
would  be  reasonable  to  suppose  that,  ordinaril}',  proof  of  a 
knowledge  by  the  mortgagee  of  the  fact  of  sales  would 
afford  presumptive  eviaence  of  an  agreement,  and  throw 
upon  the  mortgagee  the  burden  of  proving  the  contrary  ; 
and  the  ultimate  fact  as  to  such  agreement  would  thus  be 
determined,  affirmatively  or  negatively,  just  as  any  other 
material  fact  would  be.  This  process  the  student  will  find 
to  have  been  employed  in  the  class  of  cases  in  question  in 
the  fourteen  States  before  named. ^  If  the  fact  of  the 
agreement  be  proved,  the  rule  of  law,  without  qualification, 
is  applied,  and  the  result  is  an  adjudication  of  fraud  in  the 
transaction. 

§  153.  Conclusions.  — As  a  result  of  this  examination  of 
the  questions  pertaining  to  this  branch  of  the  law,  the  follow- 
ing general  propositions  may  be  advanced. 

1.  Fraudulent  intent,  i.e..,  an  intent  to  defraud,  is  always, 
ex  necessitate  rei,  a  question  of  fact,  whether  made  so  by 
statute  or  not. 

2.  That  intent  which  courts  sometimes  call  a  legal  intent 
is  not  identical  with  the  former.  By  this  is  meant  only  the 
intent  to  do  the  act  which  is  recoo-nized  as  having  a  neces- 
sarily  prejudicial  effect. 

3.  Whatever  may  be  the  facts  material  to  the  decision 
of  the  case,  they  are  to  be  ascertained  according  to  the 
practice  of  the  court ;  and  this  should  be  done  by  the  jury 
in  all  jury  cases.  In  the  first  named  class  of  cases,  the 
intent  to  deceive  is  a  material  fact.  In  the  second,  the  cor- 
responding material  fact  is  the  intent  to  do  the  act  com- 
plained of. 

4.  The  fact  being  ascertained  in  either  of  the  two  classes 
of  cases  above  mentioned,  the  only  proper  concern  of  juris- 
prudence is  to  apply  a  definite  and  just  rule  of  law  to  the 

1  ^r»^e.  sects.  114,  145. 

242 


SUPPOSED    QUALIFICATIONS    OF    THE    DOCTRINE.       §    153 

case.     This  rule,  when  formulated,  may  be  called  a  doctrine 
of  substantive  law. 

5.  The  mode  of  ascertaining  the  facts  cannot  detract 
from,  or  affect  by  either  enlargement  or  limitation,  the  rule 
of  law.  Questions  as  to  the  mode  of  ascertaining  the  facts 
can  be  no  other  than  questions  of  procedure. 

6.  Jurisprudence,  being  absolutely  impartial  in  its  view 
of  all  such  cases,  is  ready  to  consider  every  important  or 
material  fact,  and,  by  reference  thereto,  to  determine  which 
rule  of  substantive  law  is  applicable ;  and  thus  to  exclude 
the  application  of  the  rule  which  governs  cases  of  fraud 
or  fraudulent  tendency,  whenever  the  facts  make  that  rule 
inapplicable. 

7.  In  entire  harmony  with  all  well  considered  cases  in 
which  either  of  the  foregoing  propositions  is  adopted  and 
followed,  Robinson  v.  Elliott  and  kindred  cases  apply  the 
substantive  rule  of  law,  that  a  reservation  to  the  mortgager 
of  a  discretionary  power  of  sale  of  the  goods  renders  the 
mortgage  fraudulent. 

243 


§    154:      FRAUDULENT   MORTGAGES   OF   IMERCHANDISE. 


CHAPTER    X. 

OTHER  FORMS  OF  FRAUDULENT  RESERVATION. 

Section  154,  General  principles  of  law  applicable  to  several  classes  of 
cases.  , 

155.  The  abstract  rule  involved  in  Robinson  v.  Elliott. 

156.  Different  modes  of  reserving  control  of  property. 

157.  Reservations  of  power  of  revocation. 

158.  Reservations  of  interest  in  real  estate. 

159.  Reservations  of  the  use  of  property  consumable  in  the  use. 

160.  Reservations  of  rights  or  privileges  under  assignments  for 

creditors. 

161.  Reservations  of  power  of  appointment. 

162.  Summary. 

§  154.  General  principles  of  law  applicable  to  several 
classes  of  cases.  — Before  the  student  of  this  subject  closes 
his  investijjations,  his  attention  should  be  directed  to  certain 
classes  of  cases,  which  do  not  fall  within  the  category  of 
conveyances  involving  a  reserved  power  of  sale,  but  in 
which  there  are  reservations  of  other  incidents  of  owner- 
ship, and  which  are  so  closely  analogous  that  the  princii:»le 
of  substantive  law  which  governs  them  may  be  considered 
identical.  If  it  shall  appear  that  in  the  classes  of  cases 
now  to  be  noticed,  a  given  principle  of  laAV  is  applied  as 
fundamental,  and  to  so  universal  an  extent  that  its  propri- 
ety and  its  salutary  character  are  practically  unquestioned, 
it  will  logically  follow  that  the  same  principle  should  be  ap- 
plied wherever  it  properly  may  be,  in  order  to  preserve  the 
harmony  of  jurisprudence.  These  cases  are  all  believed  to 
rest  upon  a  fundamental  general  principle,  which  is  com- 
monly regarded  as  an  essential  of  modern  jurisprudence. 
Apparently  it  is  quite  applicable  to  cases  of  mortgages  on 
244 


OTHER   FORMS   OF   FRAUDULENT   RESERVATION.       §     155 

stocks  of  goods  with  power  of  sale  reserved ;  an  applicabil- 
ity which  has  several  times  been  mentioned  by  courts  and 
text-writers.  Apparently,  too,  its  application  to  them,  in 
distinct  terms,  if  more  generally  recognized,  would  tend  to 
remove  many  of  the  difficulties  attending  this  vexed  question. 
It  will  be  remembered  that  these  difficulties  largely  grow 
out  of  misunderstood  distinctions  between  substantive  law 
and  adjective  law.  In  determining  the  propriety,  the  justice, 
or  the  applicability  of  any  rule  of  substantive  law,  it  is  not 
important  to  consider,  first,  what  is  the  character  or  frame 
of  the  action  in  the  particular  case;  or  second,  by  what 
sort  of  evidence  the  facts  of  the  case  are  established  ;  or 
third,  whether  an  agreement  to  do  or  to  allow  a  particular 
act  or  course  of  acts  appears  in  writing,  or  is  proven  by 
parol;  or  fourth,  whether  the  facts  are  ascertained  by  the 
verdict  of  a  jury,  or  by  the  direct  investigation  of  a  court; 
or  fifth,  any  other  question  of  mere  procedure;  or  sixth, 
wheth'er  or  not  the  Legislature  has  achieved  the  supereroga- 
tory work  of  declaring  that  a  question  of  fact  shall  not  be 
considered  a  question  of  law.  It  is,  on  the  other  hand, 
proper  to  inquire  whether,  in  case  a  certain  state  of  facts 
be  satisfactorily  established,  a  certain  rule,  which  may  be 
stated  in  abstract  and  general  terms,  is  reasonable,  sensible, 
and  just  in  itself,  and  ought,  in  consideration  of  the  status 
and  requirements  of  jurisprudence,  to  be  applied  as  a  prin- 
ciple fundamental  to  the  particular  case  and  to  all  similar 
cases.  B}^  this  method,  the  proper  distinction  between  the 
law  and  the  facts  will  be  kept  in  mind,  each  will  be  confined 
to  its  proper  province,  and  the  inherent  difference  between 
them  will  be  so  comprehended,  that  it  will  be  seen  that  while 
no  statute  can  convert  one  into  the  other,  neither  can  any 
statute  well  assist  in  keeping  them  separate. 

§  155.  The    abstract    rule    involved    in    Robinson   v. 
Elliott.  —  The  doctrine  of  llobinson  v.  Elliott  and  kindred 

245 


§    156      FRAUDULENT  MORTGAGES    OF   MfeRCHANDISE. 

cases  may  be  re-stated  as  follows :  that  a  mortgage  upon  a 
stock  of  goods  in  trade,  under  which  the  mortgager  is  per- 
mitted by  the  mortgagee  to  sell  the  goods  at  his  discretion  in 
the  usual  course  of  business,  is  inherently  and  essentially 
fraudulent  as  to  creditors  of  the  mortjjajjer.  The  reasons 
for  this  .rule  have  been  seen  to  be,  that  such  a  transaction 
falsely  pretends  to  be  a  mortgage,  while  in  reality  it  is  in- 
consistent with  the  idea  of  a  security,  and  amounts  merely 
to  a  cloak  for  an  exercise  by  the  mortgager  of  the  most 
practical  and  substantial  power  incident  to  ownership, 
namely,  the  power  of  uncontrolled  disposition.  Reduced 
to  its  simplest  analysis,  the  abstract  rule  may  be  stated  thus  : 
that  a  reservation  by  the  grantor  in  a  pretended  conveyance 
of  property^  of  a  2>oiver  of  controlling  or  disposing  of  it,  is 
utterly  inconsistent  with  the  idea,  of  a  conveyance,  and  ren- 
ders the  pretended  conveyance  fraudulent  and  void.  As 
thus  stated,  this  is  a  doctrine  applicable  to  the  other  classes^ 
of  conveyances  now  to  be  noticed,  in  which  other  incidents 
or  attributes  of  ownership  are  reserved,  and  which  is  fre- 
quently so  applied  as  to  avoid  them,  with  little  dissent  from 
courts,  practitioners,  or  text-writers. 

§  156,  Different  modes  of  reserving  control  of  prop- 

ertj'. — There  is  no  variation  between  the  salient  facts 
of  these  cases  and  those  of  such  cases  as  Robinson  v. 
Elliott,  which  calls  for  any  variation  in  the  statement  of 
this  general  doctrine.  The  variations  in  the  facts  of  the 
several  classes  of  cases  grow  out  of  differences  between 
classes  of  conveyances,  or  differences  in  the  incidents  of 
ownership  which  are  reserved.  Conveyances  of  land  differ, 
as  to  their  form,  objects  and  purposes,  and  sometimes  as 
to  parties  and  solemnities,  from  conveyances  of  chattels  ; 
and  the  variations  in  conveyances  of  different  classes  of 
chattels  are  numerous.  So,  there  will  be  observed,  first, 
different  modes  of  reserving  control  to  the  grantor ;  second, 
246 


OTHFR   FORMS   OF   FRAUDULENT   RESERVATION.       §     157 

differences  in  the  character  of  control  reserved  ;  and,  third, 
different  tests  of  the  inconsistency  of  such  reservations, 
varying  according  to  the  forms,  subjects,  objects  and  requi- 
sites of  different  conve^'^ances.  But  under  a  rule  stated  in 
so  general  terms  as  those  employed  above,  all  such  differ- 
ences are  minor  and  immaterial.  The  abstract  essentials  of 
the  doctrine  of  Robinson  v.  Elliott,  namely,  a  pretended 
conveyance  by  the  owner  of  property,  and  an  inconsistent 
reservation  by  him  of  control  over  it,  are  found  in  the 
classes  of  cases  now  to  be  observed. 

These  cases  may,  for  convenience,  be  classified  according 
to  the  character  of  control  reserved,  as  follows  :  — 

1.  Reservations  of  power  of  revocation. 

2.  Reservations  of  interest  in  real  estate. 

3.  Reservations  of  use  of  property  consumable  in  the  use. 

4.  Reservations  of  rights  or  privileges  under  assignments 
for  benefit  of  creditors. 

§  157.  Reservations  of  power  of  revocation.  —  In  Eng- 
land, the  doctrine  was  established  at  an  early  day  that  a 
reservation  in  a  conveyance,  of  a  power  of  revocation, 
would  render  the  conveyance  fraudulent ;  and  the  rule  M'as 
applied  in  favor  of  both  creditors  and  purchasers,  and  to 
conveyances  of  both  lands  and  chattels.  A  somewhat 
common  form  of  such  conveyances  was  to  insert  a  condi- 
tion that,  on  tender  of  a  small  sum  of  money,  the  convey- 
ance should  be  void ;  w^hich  was  recognized  as  equivalent  to 
an  unconditional  power  of  revocation.  The  statute  of  27th 
Eliz.,  in  favor  of  purchasers,  contained  a  special  reference 
to  poAvers  of  revocation,  the  reservation  of  which  was  then 
so  common. 

In  Tyrer  v.  Littleton,^  in  1612,  in  the  Common  Pleas, 
Coke,  C.  J.,  referred  to  a  case  in  the  King's  Bench,  in  the 
28th  Eliz.,  in  which  it  had  been  adjudged  that  the  reserva- 

1  2  Brownlow,  187. 

247 


§    157       FRAUDULENT    MORTGAGES    OF    IVIERCIIANDISE. 

tion  of  a  power  of  revocation  made  a  conveyance  fraudu- 
lent as  to  a  purchaser;  and  Wynch,  J.,  remarked  that  if 
a  conveyance  contain  a  power  of  revocation,  —  wliich  is 
declared  to  be  apparent  fraud  by  the  statute  ( 27th  Eliz.), — 
the  court  may  take  notice  of  that  without  any  averment. 

The  law  was  thus  frequently  declared  by  the  courts  in 
cases  where  purchasers  complained.^ 

Dyer  cites  such  a  case,  Avhich  arose  just  prior  to  the 
passage  of  the  statute  13th  Eliz.,  in  which  there  was  a 
proviso  that  the  conveyance  should  be  void  on  the  payment 
of  ten  shillings,  and  the  grantor  being  then  indebted,  but 
continuing  after  judgment  to  secure  the  profits  of  the  lands 
♦conveyed,  his  creditors,  after  the  j^jassage  of  that  act,  reached 
and  subjected  the  land  upon  an  elegit.^  In  a  note  to  this 
case.  Dyer  cites  several  earlier  cases,  some  arising  in  the 
reign  of  Edward  III.,  where  conveyances  of  land,  under 
which  the  grantor  reserved  the  profits,  had  been  adjudged 
fraudulent  as  to  creditors,  thus  evidencing  the  antiquity 
of  this  principle  of  law. 

It  would  seem  from  this  that  the  express  provision  of  the 
statute  27th  Eliz.,  making  void  as  to  purchasers  any  con- 
veyance of  lands  containing  a  power  of  revocation,  was  but 
declaratory  of  a  general  principle  of  law,  already  recog- 
nized, that  such  a  reservation  is  fraudulent.  So  the  law 
seems  to  be  understood  by  the  learned  author  of  Chance 
on  Powers.^ 

Bethel  v.  Stanhope*  was  a  case  of  a  voluntary  gift  of 
goods,  with  a  condition  for  reconveyance  on  payment 
of  twenty  shillings,  which  was  complained  of  by  a  cred- 
itor. "All  the  court  held  that  this  gift  of  the  goods  is  in 
itself  fraudulent,  as  appears  by  the  condition." 

»  Standen  v.  Bullock,  3  Coke,  82  b  (1600);  Anon.,  Lane,  22  (160G);  Garth 
V.  Ersfeild,  J.  Bridgraan,  22  (1616);  Lavender  v.  Blackstone,  2  Lev.  146,  3 
Keble,  526  (1674). 

2  Anon.,  Dyer,  295  a. 

»  Sect.  1843.  *  Croke  Eliz.  810  (43  Eliz.). 

248 


OTHER  FORMS   OF   FRAUDULENT   RESERVATION.       §    li>  t 

In  The  Kino:  v.  Nottinorham/  which  was  brousrht  in  the 
Exchequer  to  set  aside  a  conveyance  of  lands  made  by  Sir 
Robert  Dudley,  which  contained  a  power  of  revocation, 
the  case  was  argued  for  the  crown  upon  princi})los  appli- 
cable to  conveyances  fraudulent  as  to  creditors  ;  and  Sir 
Walter  Raleigh's  Case  was  cited  as  apposite,  in  which, 
under  a  convej^ance  by  him  of  lands,  he  had  reserved 
and  enjoyed  the  profits  thereof,  which  had  been  held 
fraudulent ;  and  a  decision  was  rendered  here  also  in 
favor  of  the  crown,  though  the  reasons  therefor  are  not 
stated. 

In  Tarback  v.  Marbury,^  it  was  expressly  decided  that 
the  reservation  of  a  power,  in  a  deed  of  lands,  to  mortgage 
or  dispose  of  the  same  as  the  grantor  should  think  fit, 
amounted  in  effect  to  a  power  of  revocation,  and  therefore 
rendered  the  deed  fraudulent  as  to  creditors.  In  Peacock  v. 
Monk,^  Lord  Hardwicke  said :  "If  there  is  a  power  of  revo- 
cation in  such  a  deed,  it  is  a  constant  evidence  of  fraud." 
In  Rock  V.  Dade,*  in  1709,  Lord  Chancellor  Cowper  found, 
in  a  voluntary  settlement  for  children,  two  powers  of  revo- 
cation ;  one,  for  the  grantor  and  his  wife  jointly  during  the 
coverture  to  revoke,  which  was  in  effect  the  grantor's  sole 
power,  the  wlie  being  sub  potestate  viri ;  the  other,  for  the 
grantor  to  revoke,  if  he  survived  his  wife  ;  all  which  was 
considered  void  as  to  creditors. 

Recently,  in  Smith  v.  Hurst,^  a  deed  in  trust,  professedly 
made  for  the  benefit  of  creditors,  was  discovered  upon  ex- 
amination to  be  "  a  mere  deed  of  management,  which  it  was 
competent  to  Hurst  (the  grantor)  at  any  time  to  alter  or 
revoke  ;  "  and  the  vice-chancellor  said  that  "  a  deed  which 
the  debtor  has  power  to  revoke,  and  attempts  to  use  as  a 
shield  against  his  creditors,  cannot  be  otherwise  than  fraud- 

1  Lane,  42  (1609),  *  Cited  in  May  on  Fraud.  Conv.  520. 

»  2  Vernon,  510  (1705).  ^  10  Hare,  SO  (1852). 

»  1  Ves.  sr.  127  (1748). 

249 


§    157      FRAUDULENT   MORTGAGES    OF   IMERCHANDISE. 

ulent  and  void  against  the  creditors."  To  the  same  effect 
is  Jenkyn  v.  Vaughan.^ 

The  authorities  in  America  on  the  question  of  the  effect  of 
a  power  of  revocation  are  few.  The  leading  case  is  Riggs 
V.  Murray,-  in  which  there  were  five  several  conveyances 
by  way  of  general  assignment  for  creditors.  The  first 
contained  a  power  of  revocation;  the  second  made  new 
appointments  and  reservations;  the  third  revoked  all  the 
grants  of  the  second,  and  prepared  the  way  for  the  fourth, 
which  gave  new  instructions  to  the  trustees  as  to  their 
duties  ;  the  fifth  made  a  new  provision  for  creditors,  and 
provided  for  the  support  of  the  grantors  themselves  for  a 
period  of  time.  Chancellor  Kent  held  all  these  convey- 
ances void,  saying  that  the  grantors  had  been  "  sporting 
with  the  property  as  their  OAvn;"  that  there  was  a  neces- 
sary inference  of  a  purpose  to  "  hinder,  delay  or  defraud 
creditors;"  that  "  the  only  effect  of  such  an  assignment 
is  to  mask  the  property;  "  and  said  further,  "that  such 
powers  of  revocation  are  fatal  to  the  instrument,  and 
poison  it  throughout,  appears  to  have  been  well  established 
by  authority." 

The  reversal  of  this  decision  by  the  Court  of  Errors' 
does  not  seem  to  have  received  the  endorsement  of  jurists 
generally,  if  indeed,  it  is  to  be  understood  as  detracting  from 
the  authority  of  the  rules  of  law  announced,  which,  perhaps, 
was  not  intended  by  the  appellate  court ;  *  and  citations  are 
most  commonly  made,  both  by  courts  andtext-v^riters.  from 
the  opinion  of  the  chancellor. 

In  Shannons.  Commonwealth^  and  West  v.  Snodgrass,* 
a  sale  of  personal  property,  with  a  reservation  to  the  rendee 
of  the  right  to  rescind  the  contract,  was  in  each  case   held 

1  3  Drewry,  419.  (1856.)  «  2  Johns.  Ch.  665. 

'  Murray  v.  Riggs,  15  Johns.  571. 
*  See  Lang  v.  Lee,  3  Rand.,  at  p.  425. 
'  8  S.  &  R.  444.  6  17  Ala.  549. 

250 


OTHER   FOR3I8    OF    FRAUDULENT   RESERVATION.       §    158 

fraudulent  and  void  as  to  the  creditors  of  the  vendor,  on 
the  ground  th;it  this  arrangement  was  in  effect  a  power  of 
revocation  reserved  to  the  latter,  and  therefore  within  the 
general  rule  above  referred  to. 

In  Cannon  v.  Peebles^  this  general  rule  was  approved, 
though  not  applied  to  the  case  because  the  facts  did  not  call 
for  its  application. 

§  158.  Reservations  of  interest  in  real  estate. — Fre- 
quent attempts  have  been  made  by  grantors  of  real  estate 
to  reserve  benefits  to  themselves,  either  by  way  of  control 
of  the  estate,  or  receipts  of  its  profits,  or  otherwise ;  and  the 
courts  as  a  rule  have  condemned  such  transactions  when 
called  on  to  examine  them.  A  few  instances  will  suffice  to 
illustrate  the  subject. 

In  Gibbs  v.  Thompson,^  the  grantor  of  the  land  by  a 
subsequent  conveyance  reserved  to  himself  the  power  to 
sell  the  land,  make  deeds  of  the  same  and  receive  the  con- 
sideration therefor;  which  transaction  the  court  set  aside, 
saying :  "  This  power  enabled  Denton,  if  he  saw  proper,  to 
make  the  conveyance  to  Thompson  nugatory  even  as  a 
security  for  the  alleged  debt."  In  Smith  v.  Conkwright,^ 
the  land  was  conveyed  absolutely  to  a  trustee,  ostensibly 
to  provide  funds  for  the  payment  of  the  grantor's  debts, 
but  the  proceeds  were  to  be  so  applied  by  the  latter  and  at 
his  discretion, which  feature  was  held  to  make  him  "  virtually 
and  potentially  the  beneficiary  of  the  trust,"  and  thus  to 
render  the  transaction  fraudulent. 

In  Fisher  v.  Henderson,^  where,  under  a  deed  of  settle- 
ment of  land  and  personal  property  on  a  wife,  the  grantor 
reserved  the  right  to  sell  and  dispose  of  the  property,  this 
was  held  fraudulent  and  void  as  to  creditors. 

1  4  Ired,  Law,  204.  3  28  Minn.  23. 

a  7  Hum.  179.  *  8  K  B.  R.  175 ;  (U.  S.  Court,  Miss.,  1873.) 

251 


§  159   FRAUDULENT  MOETGAGES  OF  MERCHANDISE. 

In  Donovan  v.  Dunning,^  the  reservation  was  of  the  use  of 
the  land  for  the  entire  life  of  the  grantor;  and  in  Coolidge 
V.  Melvin^  there  was  the  same  reservation,  with  the  addi- 
tion of  a  conditional  defeasance  to  the  children  of 
the  grantors  after  their  death.  In  Mackason's  Appeal' 
there  was  the  reservation  of  the  use  of  the  land 
for  life,  with  power  of  appointment  as  to  the  remainder 
interest;  and  in  Brinton  v.  Hook,"*  the  settlement  by  the 
husband,  for  the  wife's  benefit,  was  under  the  trusts,  first, 
for  the  use  of  husband  and  Avife  for  life,  with  power  of  ab- 
solute disposal;  second,  for  absolute  disposal  by  the  hus- 
band, in  case  he  survived  his  wife;  and  third,  for  such 
persons  as  he  might  by  his  will  appoint. 

In  Hungerford  v.  Earle  ^  there  was,  under  a  voluntary 
settlement,  a  reservation  of  fifty  pounds  sterling  per  annum 
to  the  grantor.  In  Mackie  v.  Cairns,^  Jackson  v.  Parker^ 
and  Henderson  v.  Downing,^  the  reservation  was  for  the 
support  of  the  grantor  or  his  family  for  a  limited  period. 

In  Lukins  v.  Aird  ^  and  Macomber  v.  Peck,^''  it  was  for 
the  use  of  the  land  for  a  limited  period,  free  of  rent. 

In  Kissam  v.  Edmundson,^^  the  reservation  was  of  one- 
half  of  the  entire  property  conveyed  to  a  creditor,  in  trust 
for  the  use  of  the  grantor's  wife  and  children.  In  Palmer 
V.  Giles, ^^  where  the  conveyance  was  a  general  assignment 
for  creditors,  the  reservation  was  by  way  of  excluding  all 
those  creditors  Avho  refused  to  receive  fifty  cents  on  the 
dollar  in  settlement. 

§  159.   Reservations  of  tlie  use  of  property  consumable 

in  the  use. — While  there  is  not   an  entire  accord  in  the 

1  69  Mo.  436.  '  9  Cow.  73. 

2  42  N.  H.  510,  8  24  Miss.  lOG. 

3  42  Penn.  St.  330  »  6  Wall.  78. 

*  3  Md.  Ch.  477.  'o  39  Iowa,  351. 

5  2  Vernon,  261.  "  1  Ired.  Eq.  180. 

6  5  Cow.  547,  15  Am.  Dec.  477.  '^  5  Jones  Eq.  75. 
252 


OTHER   FORMS   OF   FRAUDULENT   RESERVATION.       §    159 

American  decisions  on  the  subject  of  tlie  reservation  of  the 
use  of  property,  wliere  such  use  is  tantamount  to  its  de- 
struction, the  majority  of  the  courts  which  have  considered 
the  subject  have  pronounced  such  reservations  fraudulent. 
With  this  majority  are  the  courts  of  at  least  one  State  in 
which  the  rule  of  Robinson  v.  Elliott  is  not  favored.  The 
reason  given  is  that  such  a  reservation  is  a  practical  asser- 
tion of  one  of  the  incidents  of  ownership,  which  is  incon- 
sistent with  the  idea  of  either  an  absolute  or  a  conditional 
conveyance  of  the  property,  and  thus  renders  the  trans- 
action, of  which  it  forms  a  part,  collusive  and  fraudulent. 
Farm  and  plantation  crops  and  family  supplies  are  the 
articles  which  most  commonly  form  the  subject  of  such 
reservations. 

Ill  Darwin  v.  Handley,^  the  Supreme  Court  of  Tennessee 
thought  the  reservation  of  the  use  of  property  consumable 
in  the  use  yf'AS  prima  facie  fraudulent,  "  a  badge  of  fraud 
so  strong  as  to  be  almost  conclusive,  not  as  a  matter  of  law, 
but  of  fact  with  the  jury,  that  the  deed  was  fraudulent." 
But  in  Sommerville  v.  Horton,-  it  was  declared  that  a 
reservation  of  use  of  property,  of  a  nature  to  be  consumed 
and  exhausted  in  the  use  was  not  only  prima  facie  fraudu- 
lent, but  "  merely  colorable,  and  void,  because  in  fact  it 
had  no  operation,"  and  the  use  of  such  property  (which  was 
provisions)  "was  its  destruction."  To  the  same  effect  is 
Simpson  t;.  Mitchell.^  Such  a  conveyance  was  in  Wade  v. 
Green  *  held  good  as  between  the  parties,  though  it  would  be 
bad  as  to  creditors.  The  rule  docs  not  apply  to  any  partic- 
ular kind  of  property,  as  such;  but  the  test  is  whether  the 
property  conveyed  with  such  a  reservation  is,  under  the  cir- 
cumstances of  the  particular  case,  necessarily  consumable 
in  the  use.^ 

'  3  Yerg.  502.  s  g  Yerg.  416. 

2  4  Yerg.  540  (1833),  26  Am.  Dec.  242.  *  3  Hum.  546. 

^  Ross  V.  Young,  5  Sneed,  627 ;  Masson  v.  Anderson,  3  Bax.  290. 

253 


§  159   FRAUDULENT  MORTGAGES  OF  MERCHANDISE. 

In  Richmond  v.  Crudiip  ^  an  attempt  was  made  to  distin- 
guish between  an  agreement  for  the  use  of  such  property, 
made  as  one  of  tlie  terms  of  an  absolute  sale,  which  would 
render  it  void  j!9e?*  se,  and  a  similar  agreement  made  subse- 
quently and  in  addition  to  a  deed  in  trust,  which  it  was 
thought  would  be  only  prima  facie  fraudulent,  as  in 
Darwin  v.  Handley.  The  case  of  Charlton  v.  Lay  ^  enforces 
and  applies  this  distinction.  The  deed  in  that  case  not  con- 
taining such  a  reservation  on  its  face,  the  question  of  fraud 
was  one  for  the  jury. 

In  jNIassachusetts,  this  principle  appeared  in  a  dictum  in 
Shurtleff  v.  Willard,^  to  the  effect  that  "  there  may  be 
chattels  so  transient  in  their  existence,  or  of  such  a  nature, 
their  only  use  consisting  in  their  consumption,  that  they 
cannot  be  mortgaged;  "  for  which  Sommerville  v.  Hortoji 
was  cited  as  an  authority.  The  point  was  decided  in  Rob- 
bins  V.  Parker,*  where  there  was  a  mortgage  of  hay,  grain, 
and  produce  on  a  farm,  with  proof  that  the  mortgager  used 
and  consumed  the  property  with  the  knowledge  of  the 
m()rt(i:ao;ee ;  which  was  held  to  be  "  collusive  and  fraudulent 
against  creditors,"  again  citing  as  authority  Sommerville  v. 
Horton. 

It  will  be  observed  that  while  in  Tennessee,  the  courts 
place  upon  the  same  basis  the  reservation  o:^  the  right  to 
sell  and  dispose  of  property  mortgaged  and  the  reservation 
of  the  use  of  the  property  to  exhaustion,  Massachusetts  sus- 
tains one  class  of  cases  and  condemns  the  other.  But  in 
New  Hampshire,  where  the  appellate  court  had  to  consider  a 
case  of  a  reserved  power  of  sale  of  mortgaged  goods,  in 
Putnam  v.  Osgood,^  the  Massachusetts  case  of  Robbins  v. 
Parker  was  considered  an  authority  in  point. 

1  Meigs,  581,  33  Am.  Dec.  161.  *  3  Mete.  117. 

2  6  Hum.  495.  5  51  jsf.  h.  192  (at  p.  200). 
=*  19  Pick.  202. 

254 


OTHER   rOEMS   OF   FRAUDULENT   RESERVATION.       §    159 

Cutting  V.  Jackson  ^  was  a  case  of  a  sale  of  cattle  and 
ha}',  the  property  remaining  with  the  vendor  for  his  use, 
and  the  cattle  consuming  the  hay,  and  the  transaction  was 
adjudged  fraudulent. 

In  Farmers'  Bank  v.  Douglas  "^  the  court,  having  such  a 
mortgage  before  it,  said:  "  The  mortgaging  of  property, 
tlic  use  of  which  involves  its  consumption,  is  an  evidence 
of  fraud,  not  indeed  conclusive,  but  of  much  weight.  Un- 
less it  be  explained  satisfactorily,  it  must  cause  the  con- 
demnation of  the  instrument ;  and  it  imposes  the  burthen  of 
proof  upon  those  claiming  under  such  instrument;  and 
when  the  right  to  use  it  is  also  reserved  in  the  morto-aofe 
itself,  it  is  fraudulent  upon  its  face."  ^  Proceeding  then  to 
consider  the  facts  of  the  case  at  bar,  the  court  found  it 
"  manifest  that  the  object  was  not  to  apply  these  things  to 
the  payment  of  the  debts,  but  to  secure  the  debtor  in  their 
possession  and  enjoyment,"  and  thus  adjudicated:  "The 
reservation  in  the  conveyance  of  so  much  of  these  articles 
as  was  necessary  for  the  support  of  the  property  puts  an 
impress  of  fraud  upon  it,  from  which  there  is  no  escape. 
It  was  a  direct  benefit  secured  to  the  debtor  at  the  expense 
of  his  creditors,  which  the  law  does  not  sanction."  * 

The  cases  in  Virginia  are  not  entirely  harmonious.  The 
general  doctrine  was  stated  in  a  late  case^  to  be,  that  the 
reservation  of  the  use  of  property  consumable  in  the  use, 
such  as  the  crops  and  provisions  on  a  plantation,  furnishes 
only  an  indication  of  fraud,  but  does  not  conclusively  estab- 
lish it.  In  that  case  and  another,^  it  was  thouo;ht  the  Sfrain 
conveyed  might  have  assisted  in  maintaining  the  stock,  and 
thus    have  indirectly   benefited   the   creditor   and    not  the 

^  5f3  X.  H.  253.  3  p,  540. 

Ml  S.  &M.469.  *  p.  541. 

^  Brockenbrough  v.  Brockenbrough,  31  Gratt.  680. 
«  Sipe  V.  Barman,  26  Gratt.  563. 

255 


§  \G0      FRAUDULENT  MORTGAGES  OF  MEKCHANDISE. 

debtor;  and  in  still  another,^  stress  was  laid  on  the  circum- 
stances that  the  property  conveyed  in  the  particular  case 
was  not  necessarily  consumable,  and  also  that  the  amount 
of  consumable  property  was  inconsiderable.  But  in  one 
case,^  the  court,  while  "  recognizing  the  binding  authority  " 
of  such  cases,  held  the  conveyance  in  question  to  be  fraud- 
ulent, laying  stress  on  the  fact  that  it  embraced  "large 
quantities  of  property  consumable  in  the  use,  and  which 
must  be  used  within  the  two  years  to  be  of  any  value," 
as  sufficient  to  condemn  the  transaction.  Thus  there  appears 
to  be  in  this  State  a  disposition  to  tolerate  reservations  of 
this  kind,  provided  the  grantor  is  careful  not  to  reserve  too 
much ;  though  the  reservation  may  be  urged  upon  the  atten- 
tion of  a  jury  as  a  badge  of  fraud. 

Similarly,  it  was  thought  in  North  Carolina,  in  Dewey  v. 
Littlejohn,^  that  where  the  use  of  the  crops  was  such  that 
thereby  the  stock  conveyed  could  be  kept  together,  the 
deed  was  not  fraudulent  in  law. 

In  Alabama,  such  a  mortgage  was  in  Wiley  v.  Knight* 
held  fraudulent  as  to  creditors,  irrespective  of  the  question 
of  intent,  and  Farmer's  Bank  v.  Douglas  was  expressly 
approved  as  an  authority.  But  in  two  earlier  cases  ^  it  was 
thought  otherwise,  because  the  use  and  consumption  of  the 
produce  on  the  farm  might,  by  the  cultivation  of  the  laud, 
assist  in  producing  additional  assets. 

§  1(30.  Reservations  of  rights  or  privileges  under  as- 
signments for  benefit  of  creditors.  —  The  general  subject 
of  reservations  by  assignors  under  assignments  for  credi- 
tors is  a  prolific  one ;  and  it  has  been  so  fully  treated  by 
the  text-writers,®  that  a  few  only  of  the  multitude  of  cases 

1  Cochran  v.  Paris,  11  Gratt.  348. 

2  Quarles  v.  Kerr,  14  Gratt.  48. 

3  2  I  red.  Eq.  495.  *  27  Ala.  336. 

5  Ravisies  v.  Alston,  5  Ala.  297 ;  Elmes  v.  Sutherland,  7  Id.  262. 

6  For  a  full  exposition  of  the  subject,  see  Bishop's  Burrill  on  Assts.,  ch.ll; 
Bump,  on  Fraud.  Conveyances,  ch.  14,  15. 

256 


OTHER   FORMS   OF   FRAUDULENT   RESERVATION.       §    160 

•will  be  referred  to  here ;  ^^iifScicnt  in  number  to  direct 
attention  to  the  feature  of  attempted  control  by  the  as- 
signor, which  is  their  point  of  resemblance  to  the  cases 
already  examined. 

Burd  V.  Smith  ^  presented  the  case  of  an  assignment  for 
creditors,  with  a  reservation  that  the  assignee,  in  case  cer- 
tain of  the  creditors  would  not  accept  their  respective 
portions  within  nine  months,  should  pay  those  portions 
to  the  assignor,  for  the  ostensible  purpose  that  he  him- 
self might  therewith  settle  with  such  creditors.  This  was 
held  void  on  its  face.  The  court  discriminated  between 
the  fraud  which  rests  in  intent,  and  the  fraud  which  inheres 
in  a  fraudulent  transaction,  irrespective  of  intent,  in  these 
incisive  terms:  "The  facts  *  *  *  constitute  a  leo;al 
fraud,  so  as  to  vitiate  and  destroy  the  act,  without  crim- 
inating the  agent." 

In  the  leading  case  of  Wakeman  v.  Grover,'^  the  assign- 
ment provided  for  payments,  first,  to  certain  preferred 
creditors;  second,  partially  to  such  as  would  release  the 
assignor  in  full;  third,  to  another  preferred  class;  and, 
fourth,  if  there  was  any  surplus,  to  the  assignor.  Such 
extensive  reservations  by  the  grantor  were  held  to  make 
the  transaction  fraudulent.  On  appeal,  under  the  name 
of  Grover  v.  Wakeman,^  this  assignment  was  declared  void 
because  of  the  reservation  named  in  the  second  clause  above 
stated. 

In  Boardman  v.  Halliday,*  the  reservation  to  the  assignees 
of  power  to  give  future  preferences  among  the  creditors 
was  held  to  be  quite  as  fraudulent  as  if  the  reservation  had 
been  to  the  assignor  himself.  To  the  same  effect  is  Barnum 
V.  Hempstead.^  In  Armstrong  v.  Byrne,^  the  assignment 
broadly  cut  off  all  creditors  who  did  not  release  within  a 

'  4  Dallas,  70  (1802).  "  10  Paige,  223. 

2  4  Paige,  23.  ■  ^  7  Paige,  568. 

«  11  Weud.  187.  6  1  Edw.  Ch.  79. 

17  257 


§  IGO   FRAUDULENT  MORTGAGES  OF  MEUCHANDISE. 

certain   time,  which   was   characterized    as    being   to   the 
assignor's  personal  advantage,  by  hindering  and  delaying  his 
creditors,  if  not  otherwise.     So  it  Avas  held  also  in  Lentil- 
hon  V.  Moffat,^  of  a  reservation  to  the  assignor  of  power, 
in  case  certain  creditors  should  not  accept  and  release  their 
debtor  within  sixty  days,  to  appoint  the  proceeds  not  thus 
accepted  to  such  of  the  creditors  as  he  saw  fit.     In  Austin 
V.  Bell,-  there  was  a  broad  reservation  that  the  shares  of 
such  creditors  as  might  refuse  to  execute  releases  should 
revert  to  the  assignors  ;  which,  the  court  said,  placed  the 
property  of  the  assignors  "at  their  absolute  disposal,  to 
apply  to  their  own  use,  or  to  pay  to  their  creditors,  as  they 
pleased;  "  a  reservation  of  control  which  made  the  idea 
of  a  security  for  creditors  ridiculous.     In  Riggs  v.  Murray,^ 
the  reservation  was  of  a  power  to  appoint  new  trustees. 
In  H3'slop  V.  Clarke,*  it  was  not  merely  a  preference  to 
certain  creditors  which  proved  fatal ;  it  was  a  reservation 
by  the  assignors  of  the  right  to  make  and  declare  future 
preferences,  which  amounted  to  retaining  potential  control 
over  the  property. 

In  Pierson  v.  Manning,^  the  assignment,  preferring  cred- 
itors, provided  that  all  the  personalty  assigned  must  first  be 
exhausted  and  applied  to  payment  of  debts,  before  the 
real  estate  should  be  resorted  to,  unless  by  consent  of  the 
assignor.  This  was  held  to  be  the  reservation  of  a  right 
to  control  the  trustees  in  relation  to  a  sale  of  the  realty, 
and  therefore  fraudulent  and  void  as  to  creditors  not  pre- 
ferred. In  Atkinson  v.  Jordan,^  the  assignment  excluded 
creditors  not  releasing  the  assignor  within  ninety  days. 
In  Sangston  v.  Gaither,^  there  was  a  reservation  of  the 
surplus  after  paying  the  preferred  creditors.     In  Green  v. 

1  1  Edw.  Ch.  451.  5  2  Mich.  445. 

2  20  Johns.  442,  11  Am.  Dec.  297.  «  5  Ohio,  293,  24  Am.  Dec.  281. 

3  2  Johns.  Ch.  665.  '  3  Md.  40. 
*  14  Johns.  458. 

258 


OTHER   FOR3IS   OF   FRAUDULENT   RESERVATION.       §1(50 

Trieber,^  the  fatal  feature  was  an  unnecessaiy  delay,  for 
perhaps  an  indefinite  time,  the  grantor  retaining  in  the 
meantime  full  use  of  the  property.  In  Grimshaw  v. 
Walker,^  releases  were  exacted  as  a  condition  of  participa- 
tion, and  the  surplus  was  reserved  to  the  assignor.  In  this 
case,  as  in  many  others  of  those  cited,  the  court  in  its 
(^pinion  illustrated  clearly  the  vice  inherent  in  such  a 
reservation,  by  an  insolvent  debtor,  of  the  power  "  to 
})lace  his  property  beyond  the  legal  pursuit  of  his  cred- 
itors," and  at  the  same  time  to  impose  conditions  upon 
their  sharing  in  its  proceeds. 

One  of  the  clearest  expositions  of  this  class  of  fraud 
was  given  in  an  early  Pennsylvania  case,^  by  Brackenridge, 
J.,  who,  speaking  of  the  features  of  such  conveyances  above 
referred  to,  said:  — 

"  It  has  been  left  to  the  astutia  Americana  of  debtors,  to 
devise  such  a  warehousing  of  effects  out  of  the  hands  of  the 
law  for  a  time,  for  the  benefit  of  particular  creditors.  I 
think  it  to  the  let  and  hindrance  of  creditors,  and  that  such 
disposition  is  void  both  at  common  law  and  by  statute  ; 
though  not  fraudulent  in  fact  in  the  particular  case,  yet 
fraudulent  in  law,  and  therefore  void.  It  is  not  simply  the 
surrender  of  his  property  as  satisfaction  pro  rata  of  his 
debts,  that  the  insolvent  here  has  in  view.  He  couples  an 
interest  for  himself  in  obtaining  a  discharge  from  that  pro- 
portion of  the  respective  debts  which  may  remain  unsatisfied. 
It  is  taking  an  undue  advantage  of  the  situation  of  a  creditor, 
to  impose  this  condition.  It  is  immoral  to  exact  it. 
Volenti  non  fit  injuria  if  the  creditor  accepts,  but  it  is  mak- 
ing a  volunteer  by  compulsion,  and  is  in  fact  a  robbery. 
One  enlightened  on  the  principles  of  moral  honesty  wouki 
never  think  of  it. "  This  opinion  was  cited  and  approved  by 
Chancellor  Walworth  in  Wakeman  v.  Grover.* 

1  3  Md.  11.  2  12  Ala.  101. 

3  Lippincott  v.  Barker,  2  Bin.  174  (at  p.  191),  4  Am.  Dec.  433. 

^  4  Paige,  23 

259 


§  101   FRAUDULENT  MORTGAGES  OF  MERCHANDISE. 

Somewhat  like  the  forecroinor  cases  are  those  of  reserva- 
tions  under  conveyances  to  a  favored  creditor;  as  in  Wilson 
and  Wormal's  case/  which  was  an  assignment  of  goods  to 
one  creditor,  reserving  an  interest  in  the  surplus  over  that 
creditor's  debt,  of  which  it  was  said,  "  this  assignment  is 
altogether  void,  because  it  is  fraudulent  in  part."  In 
Passmore  v.  Eldridge,'^  under  a  conveyance  of  personal 
property,  the  jury  were  instructed  that  if  there  was  a 
reservation  of  a  part  of  the  property  to  the  benefit  of  the 
grantor,  this  would  be  fraudulent  and  void.  In  Lang  v. 
Stockwell,^  the  reservation,  under  a  conveyance  of  a  horse 
and  wagon,  of  the  use  for  an  unlimited  time,  was  declared 
to  be  a  legal  fraud.  In  Sparks  v.  Mack,*  under  a  sale  of  a 
stock  of  goods  to  a  favored  creditor,  the  grantor  reserved 
an  interest,  which  made  the  transaction  fraudulent. 

§  161.  Reservations  of  power  of  appointment.  —  Still 
another  class  of  cases,  namely,  those  involving  the  exercise 
of  a  general  power  of  appointment,  as  to  either  real  or 
personal  property,  will  be  found  on  examination  to  resemble 
very  closely  those  above  referred  to.  They  are  to  be  dis- 
tinguished by  this  feature,  that  the  rule  is  applied  alike, 
whether  the  donee  of  the  power  has  been  made  such  by 
another  person,  or  by  a  reservation  originally  made  in  a 
conveyance  or  settlement  by  himself;  or,  in  other  words,  it 
is  immaterial  whether  the  property  over  which  he  exercises 
the  power  was  originally  owned  by  himself,  or  by  another. 
Therefore,  as  the  element  of  original  ownership  is  not  always 
present,  the  grant  of  such  a  power  is  not  to  be  classed  solely 
among  reservations  by  grantors.  But  the  essential  feature 
of  these  cases  being  that  the  power  granted,  as  to  the 
vestiture  or  the  use  of  property,  is  equivalent  to  that  right  or 
control  over  property  which  appertains  to  absolute  ownership, 

'  Godbolt,  161,  (1610.)  3  55  N.  H.  561. 

M2  S.  &  R.  198.  *  31  Ark.  666. 

260 


OTHER  FORMS   OF   FRAUDULENT   RESERVATION.       §    161 

the  theory  is  that  such  a  right,  wherever  it  may  have  orig- 
inated, is  when  exercised  the  equivalent  in  all  respects  of 
absolute  ownership.  Thus  it  logically  follows  that,  as  to 
all  creditors  of  the  person  exercising  such  power,  the 
property  so  controlled  is  his  own  property  and  is  subject 
to  his  debts. 

The  distinction  is  taken  in  these  cases  that  there  must 
have  been  an  exercise  of  the  power  by  the  donee  of  it,  in 
order  to  put  the  property  within  reach  of  his  creditors. 
The  mere  grant  of  the  power  is  not  sufficient,  though  it  be 
a  general  power,  for  it  may  be  revoked,  or  it  may  never  be 
/exercised  ;  it  is  then  like  an  offer  of  property,  not  accepted  ; 
and  certain  essential  features  of  ownership  are  lacking. 
But  if  the  power  be  so  general  as  to  authorize  the  appoint- 
ment to  the  donee  himself  or  to  his  heirs,  and  he  exercise  such 
power,  he  is  in  an  enjoyment  of  the  property  not  inferior  to 
that  which  an  absolute  owner  may  exercise,  and  his  creditors 
would  be  defrauded  if  they  could  not  reach  and  appropriate 
it. 

Sir  Edward  Sugden,  in  his  treatise  on  Powers,^  ctates  the 
rule  for  these  cases  as  follows  :  "  The  beneficial  interest  a 
man  takes  under  the  execution  of  a  power  forms  part  of 
his  estate,  and  is,  according  to  the  nature  of  the  property, 
subject  to  his  debts  like  his  other  property;  nor  indeed  can 
an  appointment  be  made  so  as  to  protect  the  funds  from  the 
debts  of  the  appointee.  But  equity  goes  a  step  farther, 
and  holds,  that  where  a  man  has  a  general  power  of  appoint- 
ment over  a  fund,  and  he  actually  exercises  his  power, 
whether  by  deed  or  will,  the  property  appointed  shall  form 
part  of  his  assets,  so  as  to  be  subject  to  the  demands  of  his 
creditors,  in  preference  to  the  claims  of  his  legatees  or  ap- 
pointees." In  Kent's  Commentaries,-  the  rule  is  stated  in 
almost  the  same  terms.     In  Chance  on  Powers,^  it  is  said; 

1  V.  2,  p.  27.  2  V.  4,  p.  339.  ^  y.  2,  sect.  1817. 

261 


§  161   FKAUDULEXT  MORTGAGES  OF  MERCHANDISE. 

"A  power  is  not  property;  *  *  *  jf^  however,  the 
donee  .see  fit  to  execute  his  power,  thus  assuming  a  dominion 
over  the  property,  it  may  be  thenceforth  regarded  as  a  part 
of  his  estate,  and  as  such  subject,  at  least  in  equity,  to  the 
chiims  of  his  creditors." 

The  views  of  Lord  Chancellor  Hardwicke  were  expressed 
as  follows  in  Bainton  v.  Ward:  ^  "  Where  there  is  a  gen- 
eral power  given  or  reserved  to  a  person,  for  such  uses, 
intents  and  purposes  as  he  shall  appoint,  this  makes  it  his 
absolute  estate,  and  gives  him  such  a  dominion  over  it  as 
will  subject  it  to  his  debts."  In  this  case  Ward,  having  a 
power  to  charge  his  wife's  estate  with  a  sum  not  exceeding^ 
two  thousand  pounds,  by  his  will  devised  the  same,  and 
died  in  debt  to  the  plaintiffs  ;  and  the  lord  chancellor  held 
the  sum  devised  to  be  subject  to  the  debts  of  the  testator 
as  his  personal  assets.  The  same  rule  was  applied  by  Lord 
Hardwicke  to  similar  states  of  facts,  in  Pack  v.  Bathurst,^ 
Troughton  v.  Trouo-hton^  and  Townshend  v.  Windham;* 
in  which  last  named  case  the  power  of  appointment  had 
been  executed  in  favor  of  the  testator's  daughters,  which 
Lord  Hardwicke  held  to  be  a  voluntary  conveyance,  saying, 
"A  man  actually  indebted,  and  cc^nvejnng  voluntarily, 
always  means  to  be  in  fraud  of  his  creditors  as  I  take  it."  ^ 
These  decisions  follow  the  earlier  cases  of  Thompson  v. 
Towne,®  Lassells  v.  Cornwallis^  and  Hinton  v.  Toye,^  in 
each  of  which,  property  so  placed  at  the  disposal  of  a  party, 
who  assumed  control  of  it,  was  held  to  be  his  property.  In 
Ashfield  V.  Ashfield,'  a  party  had  settled  property  upon 
trustees,  in  trust  for  such  persons  or  uses  as  he  should  by 
deed  or  will   appoint,  and  in  default  of   appointment,  in 

J  2  Atk.  172  (1741).  «  2  Vernon,  319  (1694). 

2  3  Atk.  269.  '  2  Vernon,  465  (1704.) 

3  3  Atk.  656.  «  1  Atk.  465  (1739.) 
*  2  Ves.  sr.  1  »  2  Vernon,  287. 

5  p.  11. 

262 


OTHER  FORMS   OF   FRAUDULENT   RESERVATION.       §    KU 

trust  for  himself  or  his  representatives;  which  was  held  to 
leave  him  in  equity  still  the  owner  of  the  property,  so  it 
was  subject  to  his  debts.  This  doctrine  is  stated  in  all 
these  cases  as  a  rule  of  positive  law.  It  was  recognized  as 
such,  by  Lord  Eldon,  in  George  v.  Milbankc.^  It  was  ap- 
plied and  enforced  in  Attorney  General  v.  Staff, ^  in  the  Ex- 
chequer, by  charging  with  probate  duty  property  which  had 
been  conveyed  by  the  testamentary  exercise  of  such  a 
power.  So  in  Goodtitle  v.  Otway,'^  it  was  held  that  a  power 
of  disposition  by  will  gives  an  absolute  fee  in  real  estate. 

This  rule  was  enforced  in  Johnson  v.  Ciishing*  and  Tall- 
madge  v.  Sill,^  where  the  power  of  appointment  could  be 
exercised  only  by  will,  but  it  having  been  so  exercised,  the 
principle  applied ;  the  court  saying  in  the  former  case, 
"  We  see  no  reason  to  gainsay  the  soundness  and  justice  of 
it;"  and  stating  it  in  the  latter  case  in  these  words,  "  that 
the  absolute  power  of  conveying  or  disposing  of  property, 
for  one's  own  benefit,  makes  the  person  to  whom  it  is  given 
the  owner  ;  the  power  of  absolute  and  beneficial  control 
cannot  and  ought  not  to  be  separated  from  the  ownership." 

In  the  late  case  in  New  York,^  the  rule,  receiving  assent 
as  a  common-law  rule,  was  held  to  have  been  abolished  by 
the  Revised  Statutes. 

These  cases  have  not,  as  a  rule,  been  based  upon  con- 
siderations applicable  to  fraud  in  conveyances.  Generally 
originating  in  equity,  it  has  been  found  sufficient  to  apply 
to  them  the  equity  rules  usually  invoked  in  favor  of  cred- 
itors who  seek  to  reach  assets  of  their  debtors.  It  is  plain, 
however,  that  the  attempt  to  exercise  such  a  power  in  defi- 
ance of  creditors  would  operate  a  fraud  upon  them",  in 
the  same  manner  as  would  any  of  the  reservations  treated 
of  in  this  chapter.     As  has  already  been  seen.  Lord  Hard- 

1  9  Ves.  jr.  190  (1803).  ■»  15  N.  H.  298,  41  Am.  Dec.  694. 

2  2  Cromp.  &  Mees.  124.  *  21  Barb.  34. 

3  2  Wilson,  6.  .  «  Cutting  v.  Cutting,  86  N.  Y.  522. 

203 


§     1(5:^       FliAUUULENT    MORTGAGES    OF    MERCHANDISE. 

wicke  in  one  such  case  adverted  to  the  matter  of  fraud 
upon  creditors  as  an  element  properly  to  be  considered. 
In  one  American  case^  it  was  said  by  the  court:  "  Under- 
taking to  exercise  a  power  which  authorized  him  to  appro- 
priate the  property  to  the  payment  of  his  creditors,  by  a 
mere  gift  or  legacy  without  making  provision  for  them,  is 
a  fraud  upon  them." 

§  1()2.  Summary.  —  In  all  the  cases  of  reservations  by 
grantors,  discussed  in  this  chapter,  the  courts  have  found 
the  element  present  of  an  attempted  control  by  the  grantor 
over  the  property  conveyed,  inconsistent  with  the  convey- 
ance, and  consistent  only  with  the  idea  of  a  continued  own- 
ership, to  some  extent  if  not  absolutely,  by  the  grantor. 
The  harmony  of  jurisprudence  can  be  preserved,  in  such 
cases,  only  by  treating  the  property  thus  dealt  with  as  the 
property  of  him  who  thus  reserves  control  over  its  dispo- 
sition. This  rule  of  substantive  law  has  been  admirably 
condensed  by  Mr.  Bump,  in  these  words  :  "Absolute  power 
of  disposition  is  substantial  ownership;  but  liability  for 
debts  is  an  inseparable  incident  of  ownership."  ^ 

This  is  an  accurate  statement,  from  one  point  of  view, 
of  the  salient  feature  of  such  cases  as  Robinson  v.  Elliott, 
and  the  principles  of  law  applicable  thereto.  The  reserva- 
tion, by  a  mortgager,  of  the  discretionary  power  of  sale  or 
disposition  of  the  goods  mortgaged,  is  a  reservation  of  one 
of  the  most  essential  and  potential  features  of  ownership. 
A  power  of  revocation,  a  power  to  consume  by  use,  or  a 
power  to  exercise  any  other  species  of  control  over  the 
propert}^  can  scarcely  be  a  greater  interference  with  the 
rights  of  creditors  than  a  power  to  sell;  indeed,  any  reason 
which  condemns  any  of  these  reservations  of  other  powers 

1  John3on  v.  Gushing,  15  N.  H.  298,  41  Am.  Dec.  694. 
'  Article,  4  Cent.  Law.  Jour.  219. 
264 


OTHER  FORMS  OF  FRAUDULENT  RESEK^■ATIO^I.   §  162 

seems  to  apply  with  even  greater  force  to  the  reserved 
power  of  sale. 

The  inconsistency  being  apparent,  shall  the  transaction 
be  held  positively  fraudulent?  It  is  so  held  in  the  classes 
of  cases  referred  to  in  this  chapter.  As  already  seen,  it  is 
so  held  by  the  majority  of  the  American  courts  in  cases 
presenting  a  reservation  of  a  power  of  sale  of  mortgaged 
goods.  The  language  in  which  these  courts  have  generally 
characterized  all  such  transactions,  as  heretofore  quoted, 
may  be  supplemented  by  that  of  a  learned  writer,  whose 
doubts  in  reference  to  reservations  of  a  power  of  sale  do 
not  extend  to  the  classes  of  reservations  referred  to  in  this 
chapter.  Speaking  of  "  Trust  Assignments  in  the  Nature 
of  Mortgages,"  he  says  that  "  such  an  assignment,  with 
avy  reservation  by  the  debtor  for  his  oivn  use  or  benefit  in 
any  way,  is  fraudulent  per  se,  and  absolutely  void;  it  is 
also  void  if  it  leaves  the  property  to  any  extent  under  the 
control  of  the  debtor  or  of  his  assignee."  ^ 

It  is  by  the  application  of  the  precise  principles  of  sub- 
stantive law  thus  expressed,  that  Robinson  v.  Elliott  and 
kindred  cases  have  condemned  mortgages  on  stocks  of 
goods,  with  power  reserved  to  the  mortgager  to  make 
discretionary  sales  in  the  usual  course.  Stated  compre- 
hensively, these  principles  are  :  — 

First:  Such  a  reservation  is  inconsistent  with  the  idea 
of  a  conveyance  for  the  benefit  of  a  creditor. 

/Second:  It  being  consistent  only  with  absolute  owner- 
ship, the  property  to  which  the  reserved  power  applies 
remains  subject  to  the  grantor's  debts. 

Third:  The  pretence  that  a  conveyance  with  such  a 
reservation  is  a  real  security,  is  in  itself  a  fraud,  which 
condemns  the  conveyance,  and  requires  that  it  be  set  aside 
at  the  suit  of  a  complaining  creditor. 

1  Jones  on  Chat.  Mort.,  sect.  352. 

265 


INDEX. 


[References  are  to  sections.'] 

SECTION 

Absolute  and  conditional  sales,  no  real  distinction  between,  as  to 

fraud  therein 7,  99 

Act  of  delivery  of  goods  to  mortgagee,  though  after  a  fraudulent 

convej'ance,  may  be  valid       .         .        31,  51,  64,  144 

but  must  be  free  from  fraudulent  intent  .        .  144 

of  assumption  of  possession  by  mortgagee  does  not  validate 

a  fraudulent  mortgage  .        •        .         .        .         .         .       51,52,143 

Acts  and  agreements,  intent  to  defraud  inferred  from    .     SO,  39,  45,  51,  G2 

of  ownership  are  evidence  of  fraud        ....  155,  156 

are  inconsistent  with  idea  of  securit}'', 

10,  12,  44,  77,  79,  156 

effect  to  be  given  to 7,  8,  13 

Actual  fraud,  reservation  of  power  of  sale  is 

9,  43,  52,  60,  78,  84,  117,  120,  121,  129,  131 

fraud  in  conveyances  is  one  form  of  ...  117,  118 

was  exhibited  in  Twjaie's  Case  ....  6 

and  fraud  in  law  not  antithetical  terms   .         .       3,118-122 

and  fraud  in  fact,  not  synonjonous  terms  ,         .      3,  118 

and  intent  to  defraud,  distinction  between        .        .  119,  120 

and  constructive  fraud,  distinguished       ...  3 

defined  and  distinguished   .  119 

terms  misunderstood  .        .     3,  118 

Adjective  law.    See  Procedure. 

Adjudication,  processes  of,  illustrated 136,  146 

Agent  for  mortgagee,  power  of  sale  as,  not  fraudulent  per  se, 

36,  36,  41,  43,  46,  49,  53,  57,  58,  75,  97,  104,  137,  138,  139,  140 
but  must  be  free  from  in- 
tent to  defraud      .        .      53,  87 
presents  an  entirely  new 

case        ....  137-140 
calls  for  a  different  doc- 
trine      ....  137-139 
the     distinction     clearly 
stated    ....  43 

(267) 


268  INDEX. 

SECTIOX 

Agent  for  mortgagee,  power  of  sale  as,  substantial  features  of     .         138 

a  question  of  law,  after 
facts  are  proven    .        .  146 
mortgager  sells  as  quasi,  in  Kansas     .        .  100 
Agreement,  fraudulent,  ascertainment  of  fact  of,  a  matter  of  pro- 
cedure only 2 

mode  of  proof  of,  immaterial     ,         4,  43,  147,  153 
for  power  of  sale  is  a  question  of  fact  .        .         .  145,  146 

for  a  jury  in  disputed 
cases        .       56,  72,  145,  146 
to  account  for  sales  is  not  alone  sufficient  to  validate 

transaction 9,  35,  39 

Alabama,  decisions  in,  as  to  reserved  power  of  sale       ,        .        .  101,  102 
the  rule  in,  respecting  reserved  power  of  sale,  left  in 

doubt 101 

jury  alone  can  di-aw  inferences  of  fraud  in      .         .         .  101 

decisions  in,  as  to  use  of  consumable  property       .         .  102,  159 

Appointment,  resei-vation  of  power  of,  fraudulent         .        .        .  161 

equivalent  to  assertion  of  ownership,  161 

inconsistent  with  any  other  theory   .  161,  162 

Arkansas  approves  the  majority  doctrine 86 

Assignee  or  trustee  must  not  collude  with  mortgager    .         .         ,  141 

must  act  for  himself         ...  12,  35,  141 

must  control  proceeds  of  sales        .         .  4,  35,  60 

Assignment  for  creditors,  stipulation  under,  that  creditors  must 

assent,  fraudulent      .         .        .         .30,  160 
reservation    of     rights    or    privileges 
under,  fraudulent        .         .         .        .30,  160 

a  legal  fraud 160 

immoral  and  dishonest   .         .        .  160 

trustees  under,  must  act  of  themselves, 

12,  35,  141 
and  control  proceeds  of  sales        .  4,  35,  60 

must  not  take  a  colorable  possession   .      59,  60 
nor  collude  with  assignor      .        .        .  14 1 


Bankruptcy  statutes,  effect  of,  in  England 32 

effect  of,  in  America 33 

the  question  of  fraud  in  such  conveyances  is 

independent  of 68,  71 

Benefit  to  mortgager,  reserved  power  of  sale  is  a, 

4,  37,  41,  45,  48,  60,  62,  63,  69,  77 

use  of  consumable  property  is  a         .        .  159 

of  mortgagee,  sales  made  solely  for,  distinction  in  case  of,  137-140 


INDEX. 


269 


Brett  V.  Carter,  doctrine  of,  stated 

erroneous  views  of  Twyne's  Case  in 
views  advanced  in,  examined 
Bucknall  v.  Roiston  of  doubtful  autliority 
Buller,  J.,  synopsis  of  Twyne's  Case,  by         .         .         . 
views  of,  in  Edwards  v.  Harben     . 
views  of,  as  to  mere  retention  of  possession 
Burnet,  J.,  views  of,  concerning  Twyne's  Case 


SECTION 

4 

6 

125 

15 

21 

9 

29 

7 


California,  mortgages  of  chattels  limited  in 112 

Characteristics,  essential,  of  chattel  mortgages      .        .        .        .69,  127 
of  a  reservation  of  a  power  of  sale,  a  controverted 

question 1 

illustrated  judicially  9,  34,  47,  69,  122,  130,  131,  132 

the  transaction  tested  by  its  .         .         .   120,  121,  122,  131 
Twyne's  Case  was  tested  by  its      .         .        .        .  122 

Chattel  mortgages  essentials  of 47,  69,  127 

misunderstood     .         .         .         .  126 

are  lost  when  mortgager  is  al- 
lowed power  of  sale        .         .  127 
are  allowed  on  stocks  of  goods  in  Georgia,  by 

statute Ill 

are  limited  in  California  and  Nevada       .        .  112 
are  unknown  in  Louisiana        .         .         .        .  113 
with  reserved  power  of  sale,  is  not  a  mort- 
gage in  fact 34,  41,  47,  69,  127 

effect  of  power  of  sale  upon.     See  Power  of 
Sale. 
Circumstances  and  acts,  fraudulent  intent  may  be  inferred  from, 

30,  39,  45,  61,  62 

Colorado,  decision  in,  on  reserved  power  of  sale    ....  65 

Common  law,  fraud  in  conveyances  a  rule  of  ....      70,  90 

reserved  power  of  sale  fraudulent,  at      .        .        .      70,  90 

rule  of,  as  to  reserved  power  of  sale,  changed  in 

Iowa,  by  statute     . ' 90 

legal  intent,  at 149 

reserved  power  of  revocation  fraudulent,  at    .         .  157 

Conditional  and  absolute  sales,  no  real  distinction  between,  as  to 

fraud  therein 7,  99 

sale  reserving  title,  not  sanctioned  if  vendee  allowed 

power  of  sale 42,  61,  79 

Connecticut,  decisions  in 79,  80 

Consequences,  necessary  or  usual,  pai'ties  are  held  to  intend, 

4,  30,  39,  60,  62,  79,  81,  84,  97,  148,  151 
of  reserved  power  of  sale,  as  stated  judicially 

69,  122,  131,  132 


270  INDEX. 

SECTION 

Construction  not  resorted  to  in  such  cases  as  Robinson  v.  Elliott,      3,  117 

Constructive  fraud,  defined 3,  119 

explained 3 

Story's  definition  of 3 

Bigelow'sdcflnition  of 117 

and  actual  fraud,  terms  misunderstood         .      3,  118 
defined    and  distin- 
guished .         .  119 
and  fraud  in  law,  not  synon}-mous  terms        .      3,  118 
and  presumptive  fraud,  considered         .        .          116 
distinguished     .         .  117,  119 
terms  defined     .        .  119 
sometimes    c  o  n- 
founded           .         .           117 
reserved  power  of  sale  does  not  present,       3,  43,  117 
Tw3'ne's  Case  did  not  present          ...  5 
fraud  in  moi'tgages  of  merchandise  is  not,     3,  43,  117 
is  a  convenient  rule  of  practice       ...  3 
statute  as  to  fraudulent  intent  is  not  a  statute 

as  to 74 

in  conveyances,  doctrine  as  to,  in  Vermont  .  110 

Consumable  property,  reservation  of  use  of,  is  fraudulent, 

44,  59,  63,  95,  102,  159 
secures  a  benefit  to 

debtor  .         .        .  159 

actual  intent  imma- 
terial    .        .        .  159 
test  of  is,  whether  it 
is  necessarily  con- 
sumable        .        .  159 
furnishes  a  rule  for 
cases  of  reserved 
power  of  sale        .    44,  159 
doubtful  views  con- 
cerning, in  Va.     .          159 
in  Ala.     .  102,  159 
Controversy  over  effect  of  mere  retention  of  possession       .        .  5 
over  effect  of  possession  with  reserved  power  of 

sale 1>  2,  4 

Conveyances.    See  Fraud  in  Conveyances. 

Court,  boinid  to  adjudge  fraud  when  facts  are  proved  .  .  102,  146,  151 
power  of,  not  limited  by  statute  as  to  fraudulent  intent  74,  75,  153 
may  direct  verdict  of  fraud  in  some  States         .        .        .41,  42 

but  not  whfu  fact  is  in  dispute 72 

and  jury,  different  provinces  of    .    50,  82,  84,  85,  103,  109,  120,  146 


INDEX.  271 

SECTION 

Courts,  opinions  of,  illustrating  fraudulent  character  of  reserved 

power  of  sale 69,  122,  131,  132 

the  language  used  by,  does  not  determine  the  importance 

of  the  question  involved 6,  16 

disclaim  authority  to  adjudicate  fraud  arising  from  a  re- 
served power  of  sale,  in  Iowa 90 

in  Maine 97 

in  Massachusetts  ....  9(5 

Covin,  defined 121,  149 

appa         and  not  apparent 149 

identical  with  modern  doctrine  of  fraud  in  conveyances    .  121,  149 

fraud  shown  by  a  reserved  power  of  sale  is         .         .        .  9 
refers  to  the  transaction  rather  than  the  motives  of  the 

parties 149 

Creditors,  rights  of,  fixed  by  rules  of  law,  not  by  opinion  of  jury,  81 

power  of  revocation  is  fraudulent  as  to         .         .        .  157 

See  Assignmext;   Delay;   Hindrance;   Power   of 

Sale;  Trustees. 

Criticisms,  of  Lowell,  J.,  upon  Robinson  v.  211iott        ...  4 

upon  reservation  of  power  of  sale,  in  Alabama  .         .  101 

in  Maryland         .  108 

in  Georgia    .        .  Ill 

upon  the  doctrine  of  Robinson  v.  Elliott,  examined    .  138 

Davis,  J.,  opinion  of,  in  Robinson  v.  Elliott     ...  4 

Defraud.     See  Intent  to  Defraud. 

Delay  of  creditors,  necessary,  makes  conveyance  fraudulent        .        4,  30 
is  an  actual  result  of  a  reserved  power  of 

sale         .         .         .         .4,  52,  54,  55,  60,  62,  69,  93 

but  not  in  Iowa 90 

Delivery  of  Goods,  by  new  act  subsequent  to  mortgage,  may  be 

valid 31,  51,  64,  144 

if  free  from  fraudulent  intent   ....  144 

Disposal,  power  of,  equivalent  to  substantial  ownership, 

39,  45,  47   54,  77,  79,  162 
compared  with  other  forms  of  reservation  to 
use  of  grantor      ....   154,  155,  156,  162 

Doctrine  of  Robinson  v.  Elliott,  stated 2,  155 

opinion  of  Davis,  J.     .         .         .  4 

is  of  English  origin      .        .        .         2,  5 
Twj'ne's  Case  the  origin  of         .  5 

not  now  vital  in  England     .        30,  31,  32 
adopted  in  Indiana       ...  75 

in  fourteen  States  .        .  114 

received  with  favor  in  others      .  114 

not  favored  in  ei"ht  States  .        .  114 


272 


INDEX. 


Doctrine  of  Bobinson  v.  Elliott, 


SECTION 

summar}'  of  views  concerning    .  114 

abstract  form  of,  stated      .        .  166 

harmonizes  with  legal  doctrines 
as  to  other  frauds     .        .        .  153 

reasons  for  its  existence, 

122,  124,  125,  128,  129,  130,  131,  132, 155 

testimony  of  observers  in  its  sup- 
port        .         4,  69,  73,  84,  122,  131,  132 

erroneousl}'  taken  to  be  a  doc- 
trine of  constructive  fraud       .  IIG,  118 

not  a  doctrine  of   presumptive 
fraud  .         .        .         .  3,  43,  61,  117 


criticised  by  Lowell,  J. 
criticisms  upon,  examined 
objections  to,  stated    . 

examined 
defective  views  of,  illustrated 
supposed  qualifications  of,  stated 
133,  137 
supposed  qualifications  of,  con- 
sidered     .         .     134,  137,  138 

Doctrine  of  Brett  v.  Carter,  stated 

Doctrine  of  Twj'ne's  Case,  vital  in  America    .... 
superseded  in  England 

Doctrines,  Legal,  considered 136 

new,  called  for,  when  substantially  new    facts 

appear      

called  for,  when  power  to  sell  is  reserved 
only  as  agent  for  mortgagee    .         .  137 

Doubtful  cases,  in  United  States  courts 

in  Indiana 

in  England 

Griswold  v.  Sheldon,  not       .... 
views  of  Twyne's  Case  and  Edwards  v.  Harben 

as    to    question  of  reserved   power    of    sale 

in  Kansas 

in  Texas  .        . 

in  Alabama 

in  various  States     .... 
Edwards  v.  Harben,  facts  of,  stated         .... 
views  of  Buller,  J.,  in 

explained 

how  understood  in  Great  Britain     . 

how  misunderstood 

doubtful  views  of     . 

question  of  possession  alone  not  involved  in 


4 

125,  138 

115,  124 

116-128 

126 

145,  152 

145,  152 

4 

33 

6,32 

137,  163 

137,  153 

138,  139 
72,  73 

76 

14,  15 

40 

25,  26 

100, 114 

106 

101 

114 

9 

9 

28,  29 

28,  29 

17,  28 

26,  26 
28,29 


INDEX.  273 

SECTION 

Eldon,  Lord,  views  of,  concerning  Tn\vnc's  Case   .        .        .        .21,22 

Ellenborough,  Lord,  views  of 11,  23 

England,  doctrine  of  Robinson  v.  Elliott  originated  in  .         .        .         2,  5 

not  now  vital  in      .        30,  31,  32 
question  as  to  retention  of  possession  alone,  settled  in  28 

rule  in,  as  to  effect  of  registration 123 

123 

151 

5-16 


reservations  by  grantor 
modern  doctrine  in,  as  to  legal  intent 
English  cases,  reserved  power  of  sale  an  element  in 


late,  inconclusive 30,31,32 

on  retention  of  possession  alone     ....      17-28 

Estoppel,  the  rule  as  to  reserved  power  of  sale  is  a  form  of         .  93 

and  fraud  often  used  as  convertible  terms      ...  93 

Evidence  of  reserved  power  of  sale,  found  outside  of  conveyance 

39,  41,  43,  45,  47,  48,  54,  55,  56,  66,  68 
form  of,  whether  in  writing 
or  by  parol,  immaterial, 
4,  41,  43,  52,  55,  56,  6G,  120,  147,  153 
of  fraud  in  conveyances,  what  is,  is  a  question  of  law-, 

82,  109,  145 
if  sufficient,  jury  should  find 
verdict  of  fraud  .        .         .81,  109 
the  fact  of  a  reserved  power  of  sale,  is  only,  in  Mas- 
sachusetts     94,  96,  114 

in  Maine,      .    97,  114 
in  Kentucky     98,  114 
presumptive,  proper  office  of,  in  considering  reserved 
power  of  sale  .         .        .         ... 

fraud  in  conveyances  is  not  a  question  of 
■when  power  of  sale  is  shown  .      43,  60 
except  in  North  Carolina 
in  Massachusetts 
and  Maine  .... 

presumption  not  resorted  to  in  such  cases       .        3,  61 
of  fraud,  inconsistent  acts  of  ownership  are  . 

mere  retention  of  possession  is  not  conclu- 
sive   17-24,  27,  28 

questions  of,  are  questions  of  procedure         .         .      2,  152,  153 

Fact,  a  question  of,  agreement  for  power  of  sale  is-       .        .         .  145,  146 

and  for  jury  in  disputed  cases     .  145,  146 
jury  to  try  all  questions  of      .         .         .   50,  56,  81,  82,  120,  146,  153 
of  fraudulent  intent  to  be  found  by  jury,  74,  109,  119,137,  144,148,  153 
of  fraudulent  agreement,  ascertainment  of,  a  matter  of  pro- 
cedure only  2 

and  law  distinguished 3,  43,  81 

18 


,  121, 

146 

.       8. 

2-85 

.' 

96 

97 

,121, 

146 

.  155, 

156 

274  INDEX. 

SECTION 
Facts,  jury  to  fmd  all,  in  cases  involving  fraud       .        .         .  145,  UO,  153 
mode  or  means  of  asceitaining,  innnaterial  .         .  2,  4,  153,  154 

of  cases  control  their  decision,  though  not  so  stated  bj'  the 

court 16,  17 

and  law,  different  elements  of        .    3,  74,  81,  120,  13G,  137,  14G,  153 

and  intents,  fraud  is  the  judgment  of  the  law  on,        79,  81,  83,  119 

Felo  de  se,  a  conveyance  becomes,  with  a  reserved  power  of  sale,  34 

Fraud,  legal,  defined 78,  149 

power  of  revocation  is 95 

reserved  power  of  sale  is 104 

reservation  of  privileges  under  assignment  is  .         .  160 

intent  as  to  moral  fraud  is  immaterial  in  considering  97 

what  is  evidence  of,  is  a  question  of  law     .        .        .         .   82,  109 

are  indications  of,  is  not  a  question  for  jury,     50,  81,  82,  145 

is  always  an  inference  of  law  after  the  facts  are  proved, 

2,  90,  102,  119,  120,  126,  151 
is  to  be  adjudicated  by  the  court  when  self-evident   .        .  117 

Is  the  judgment  of  the  law  on  facts  and  intents,         79,  81,  83,  119 
as  shown  by  a  reserved  power  of  a  sale,  is  a  question  of 

law  .  34,  30,  40,  41,  44,  52,  54,  56,  59,  62,  69,  74,  75,  77,  78,  81 
jury  should  find,  Avhen  evidence  warrants  it,  81,  85,  90,  109,  123 
reserved  power  of  sale  is  an  inlet  to   . 

is  an  easy  means  of 
opens  a  door  to 
at  common  law,  reserv^ed  power  of  sale  was 
and  estoppel  often  used  as  convertible  terms 
attempt  at  classification  of,  in  North  Carolina     , 
See  AcTiJiL  Fraud;  Constructive   Fraud;  Presump- 
tive Fraud. 

Fraud  in  Conveyances,  classified 

is  one  form  of  actual  fraud 
is  a  rule  of  jurisprudence  . 
of  the  common  law 
similar  to  the  ancient  covin 
is  not  a  rule  of  pi-ocedure  . 
Is  a  question  of  law  after  the  facts  are  set- 
tled   .  2,  38,  39,  45,  50,  56,  62,  79,  81,  82,  90,  102, 
117,  119,  120,  126,  151 
is alwaysa questionof  law,  81, 119, 120,  145, 146, 151 
is,  in  a  certain  sense,  a  question  of  fact 

also 119,  120 

is  not  a  question  of  presumptive  evidence, 

43,  00,  121,  146 

except  in  North  Carolina     .         .       82-85 

is  a  question  of  legal  intent        .         .      39,  97,  151 


80 

111 

38,  60 

,61 

. 

90 

93 

.   83 

,84 

119 

.117, 

118 

.  121, 

122 

.   70 

,90 

.121, 

149 

121 

INDEX. 


275 


SECTION 

Fraud  in  Convc5'ances  is  the  judgment  of  the  hnv  on  facts  and 

intents 79,  81,  83,  119 

office  of  court,  wlien  the  facts  are  found, 

102,  117,  145,  14G,  151 
mode  or  means  of  ascertaining  facts  im- 
material     120,  147,  153 

may  be  proved  by  implication     .         .         .  147 
duty  of  jury  to  lind,  when  evidence  war- 
rants it 81,  109 

what  is  evidence  of,  is  a  question  of  law, 

82,  109,  145 
characteristics  of  transaction  to  be  ascer- 
tained        •       .         .  121 

how  tested 146 

refers  to  the  transaction  itself, 

43,  G2,  79,  119,  121,  149 
not  to  the  motives  of  the  parties,  119,  121,  149 
actual  intent  immaterial,  in  determining 

the  question  of         .  52,  95,  97,  109,  148,  151,  159 

motives  of  parties  immaterial     .  109,  148,  149,  151 

even  though  pure,  59,  62,  77,  84,  109,  148 

registration  does  not  relieve  from      .        .    32,  123 

is  a  question  independent  of  bankruptcy 

statutes 68,  71 

makes  no  distinction  between  absolute  and 

conditional  sales 7,  99 

is  an  immaterial  question,  if  there  be  a 
valid  subsequent  transaction    between 

the  parties 144 

is  a  question  of  intent  in  Kentucky   .         .  98 

in  Texas  .         .  103 

unless  appearing  on  face 

of  deed  .         .  '      .  103 

is  fatal  in  Iowa,  in  conveyances  other  than 

those  involving  reserved  power  of  sale      ■      92 
general  views  concerning,  in  Iowa     .        .  93 

Fraud  in  fact  an  ambiguous  expression 3 

and  actual  fraud,  not  synonymous  terms  ...      3,  118 
and  fraud  in  law,  confusion  of  the  terras  .         .  82 

Fraud  in  law  an  ambiguous  expression 3 

and  actual  fraud  not  antithetical  terms      .         .       3,118-122 
and  constructive  fraud  not  synonymous  terms          .      3,  118 
and  fraud  in  fact,  the  terms  confused        ...  82 
a  question  of  presumptive  evidence  in  North  Caro- 
lina        82-86 


276  INDEX. 

SECTION 

FraiKl  ill  law,  dirtlculty  as  to  respective  provinces  of  court  and 

jury 82,84,85 

attempt  to  solve  the  difficulty  in  North  Carolina        .      83,  84 
Fraud  in  Mortgages  of  Merchandise,  the  question  concerning,  stated  1 

a  question  of  law     ...  2 

is  not  presumptive  fraud  3,  43,  Gl,  117 
is  not  constructive  fraud  3,  43,  117 
illustrated  in  the  opinions  of 

the  courts      .        .     69,  122,  131,  132 
deprives  mortgagee  of  all  rights 

under  the  conveyance   .        .  143 

is  always  held  in  Michigan  to 
rest  in  intent,         ...  88 

See  Doctrine  of  Robixson  v.  Elliott;  Mortgagee;  Power 
OF  Sale. 
Fraudulent  Agreement.     See  Agreement. 

Fraudulent  Intent,  distinguished  fi-om  actual  fraud       .        .        .119,120 

from  legal  intent     148,  149,  150,  151,  153 

from  fraudulent  tendency  .         .        2,  78 

not  a  necessary  element  of  Twyne's  Case         .  5 

in  Nebraska,  a  question  of  fact  in  some  cases  87 

a  question  of  law  in  others  .  87 

the  statute  says,  shall  be  a  question  of  fact, 

in  Indiana     ...  74 

in  Michigan  ...  88 

in  New  York         .        .    74,  151 
the  statute  as  to,  is  not  a  statute  as  to  con- 
structive fraud         .        .  74 
does  not  affect  the  question 

of  legal  fraud  .         .  74,75,151,153 
except  in  Michigan      .        .  88 

and  there  in  but  one  class  of 

cases         ....  88 

is  the  important  question,  in  considering  a  re- 
.   '  served  power  of  sale,  in  Massachusetts        .    96,  114 

in  Kentucky         .         .  98 

in  Kansas    .         .         .  100 

is  sometimes  imputed  as  a  necessary  feature  of 

a  reserved  power  of  sale        .        .        .4,  39,  51,  151 
is  a  proper  matter  of  in(|uiry  in  cases  of  simple 

preference  of  a  creditor          ....  144 
maybe  inferred  from  acts,  agreements,  and  cir- 
cumstances       30,  39,  45,  51,  62 

the  existence  of,  a  question  for  the  jury, 

53,  74,  87,  109,  119,  137,  144,  148,  153 


INDEX.  277 

SECTION 

Fraudulent  Tendency  may,  in  law,  render  a  mortgage  fraudulent,  2,  5,  78 
a  fatal  feature  of  Twyne's  Case  ...  5 

a  necessary  feature  of  a  reserved  power  of 

sale    .   44,  54,  55,  57,  CO,  G3,  G4,  77,  78,  79,  80,  131 
distinguished  from  fraudulent  intent  .        .        2,  78 
equivalent  in  its  effects  to  any  other  form  of 
fraud 78 

Georgia,  statute  in,  allows  mortgages  on  stocks  of  goods  in  trade    70,  111 

limited  in  its  application  by  the  courts  .         .  Ill 
otherwise  it  would  open  a  door  to  unlimited 

fraud Ill 

applied  as  a  rule  of  property  in  the  United 

States  court 70 

Griswold  v.  Sheldon  not  a  doubtful  case 40 

Hardwicke,  Lord,  views  of,  as  to  reserved  power  of  sale      .        ,  7 

views  of,  as  to  power  of  revocation  .         .         .  157 

Hindrance  to  Creditors,  actual,  resei-ved  power  of  sale  is, 

4,  52,  54,  55,  60,  62,  69,  93,  108 

except  in  Iowa      ....  90 

Holt,  Lord,  dictum  of,  in  Meggot  v.  Mills 19 

Illinois,  decisions  in 54,  55 

Implication,  Power  of  Sale  proven  Ijy.     See  Power  of  Sale. 

Indiana,  decisions  in 74,  75 

statute  of,  says  fraudulent  intent  shall  be  a  question  of 

fact 74 

doubtful  cases  in 76 

doctrine  of  R.  v.  E.  adopted  in 75 

Inlet  to  fraud,  reserved  power  of  sale  furnishes  an        .        .        .  80 

Intent  to  defraud.     See  Fraudulent  Intent. 
Intent,  immaterial,  if  act  be  in  itself  fraudulent, 

62,  95,  97,  109,  148,  149,  151,  159 

if  a  power  of  revocation  be  reserved       .        .  95 

if  the  use  of  consumable  property  be  reserved  159 

if  a  power  of  sale  be  reserved,        41,  45,  52,  53,  57,  59 

62,  63,  74,  77,  78,  79,  84,  121,  129,  148,  151 

purity  of,  does  not  avail  ....        59,  62,  77,  84,  109,  148 

to  defraud,  imputed  as  a  necessary  feature  of  a  reserved 

power  of  sale 4,  39,  51 

is  not  the  same  question  as  that  of  a  reserva- 
tion of  power  of  sale,  when  construing  at- 
tachment laws 5-3 

See  Fraudulent  Intent;  Legal  Intent. 


278 


INDEX. 


SECTION 

Interest  in  Real  Estate.     See  Real  Estate.     (158.^ 

Iowa,  statute  in,  makes  registration  equivalent  to  actual  delivery,  90,  114 

changes  common-law  rules 90 

effect  of,  explained  by  tlie  courts        ...  93 
fraud  in  conveyances  a  question  of  law  in,  after 

facts  are  proved 90 

mortgages  with  reserved  power  of  sale  lield  valid 

in 91 

views  in,  as  to  reserved  power  of  sale,  examined  92 

as  to  other  frauds  in  conveyances        .  93 
rule  in,  not  taken  as  a  rule  of  property  in  TJ.  S. 

court 70. 


Jurisprudence,  fraud  in  conveyances  is  a  matter  pertaining  to,  121,  122,  154 

deals  primarily  with  rules  of  substantive  law,  135,  136,  153 

questions  of  procedure  are  sul)ordinate  to      .  135,  130,  154 

the  doctrine  of  Robinson  v.  Elliott  a  rule  of  .         .  121,  154 

Jury  and  court,  different  provinces  of     .     50,  82,  84,  85,  103,  109,  120,  146 

to  try  all  questions  of  fact   ...         50,  50,  81,  82,  120,  140,  153 

question  of  existence  of  a  fraudulent  intent, 

74,  110,  137,  144,  148,  153 
question  of  intent  as  shown  by  mere  possession  .         .  109 

question  of  existence  of  agreement  for  reserved  power 

of  sale 145,  146 

but  not  question  of  indications  of  fraud  arising  there- 
from    50,  81,  82,  145 

should  find  verdict  of  fraud,  when  evidence  warrants  it, 

85,  90,  109,  120 


are  urged  to  do  so,  in  Norih  Carolina 
opinions  of,  not  to  detemnine  the  rights  of  creditors 
exception  to  this  rule,  in  Alabama 
in  Maine    . 
no  <iuestiou  for,  when  reserved  power  of  sale 

clearly  appears        .... 
are  to  draw  all  inferences  of  fraud, 

in  Maine     . 
in  Alabama 


84,  85 

81 

101 

97 


39,41,  42,  56,  74 


97 
101 


Kaleidoscope,  mortgage  on  stock  of  goods  in  trade  compared  to 
Kansas,  views  in,  respecting  reserved  power  of  sale 

the  rule  in,  left  in  doubt  .... 
Kent,  Chancellor,  opinion  of,  as  to  power  of  revocation 
Kentucky,  reserved  power  of  sale  as  considered  in 

only  a  badge  of  fraud  in 

questions  of  fraud  in,  as  shown  by  mere  possession 
Kenyou,  Lord,  opinion  of,  as  to  reserved  power  of  sale 


46,  131 

100 

100,  114 

157 

98 

98,  lU 

99 

10 


INDEX.  279 

SECTIOK 

Law  consists  of  principles,  not  cases 136 

and  fact,  distinguislied 3,  43,  81 

different  elements  of      .      3,  74,  81,  120,  136,  137,  146,  153 
offices  of.         .         .         .        81,136,137,146,153 
See  Common  Law;   Fkaud;   Fraud  in  Conveyances; 
Fkaud  In  Law;   Proceduke;    Substantive  Law. 
Legal  Doctrines.    See  Doctrines. 

Legal  Fraud,  defined 78,  149 

See  Assignment  ;  Fraud  ;  Fraud  in  Law  ;  Fraud 
IN  Conveyances. 

Legal  Intent,  explained 148,  151 

illustrated 161,  153 

at  commou  law  ........  149 

generally •         .  151 

is  the  intent  to  accomplish  the  natural  effect  of  one's 

acts 30,  62,  70,  81,  84,  97,  151 

and  intent  to  defraud,  distinguished,    148,  149,  150,  151,  153 

the  distinction  overlooked  .         .         .         .         .  150 

fraud  in  conveyances  held  to  present  a  question  of,  39,  97,  151 

is  tlie  intent  referred  to  in  the  statute  13  Eliz.  .  151 

Lien,  reserved  power  of  sale  creates  fluctuating,  not  absolute, 

41,  47,  62,  131 

certainty  of,  essential  to  a  mortgage      .        .        .        .69,  126,  127 

mortgagee  loses,  if  he  license  sales  .        ;      31,  34 

loses  only  his 144 

may  preserve,  by  controlling  pro- 
ceeds of  all  sales  .         .         .4,  38,  60,  138 

Louisiana,  chattel  mortgages  unknown  in 113 

Lowell,  Judge,  criticisms  of,  upon  doctrine  of  Robinson  w.  Elliott,  4 

same  examined  ....  125 

Maine,  mortgages  with  reserved  power  of  sale  in  common  use  in,  97 

present  cases  of  presumption,  in      .        .        .  97,  144 

cases,  Story's  view  of,  examined 73 

Mansfield,  Lord,  views  of,  as  to  reserved  power  of  sale        .        .  8 

as  to  reservations  for  benefit  of  debtor,  20 
Sir  James,  views  of,  as  to  reservation  of  control  by 

debtor 12 

as  to  mez'e  retention  of  possession,  24 

Maryland,  the  question  of  reserved  power  of  sale  not  discussed  in,  108 

such  mortgages  of  occasional  occurrence  in          .         .  108 
Massachusetts,  mortgages  with  reserved  power  of  sale  in  common 

use  in 96 

reserved  power  of  sale  only  a  badge  of  fraud  in    .  94,  114 
presents     a     (juestion     of 

fraudulent  intent,  in       .  96,  114 


280  INDEX. 

SECTION 

Massachusetts,  resen'ed  power  of  sale  may  i*;use  a  stronger  pre- 

suinptiou  of  fraud,  in 96 

inharmonious  decisions  in 95 

cases,  Story's  view  of,  examined    ....  73 
the  rule  in,  taken  as  a  rule  of  property  in  the  U.  S. 

court 4,  73 

Merchandise.    See  Chattel  Mortgage ;    Mortgagee;    Fraud 

IX  Mortgages;    Power  of  Sale. 

Michigan,  mortgages  with  reserved  power  of  sale  in  common  use  in  89 

uniformly      held 

valid  in    .        .  89 
though  liable  to 

abuse  in  .        .  88 
fraud  therein,  al- 
ways rests    in 

intent,  in          .  88,  114 

fraud  an  inference  of  law  in,  after  facts  are  proved       .  151 
statute  of,  says  fraudulent  intent  shall  be  a  question  of 

fact 88 

applies  to  such  mortgages     ....  88 
but  not  to  other  cases  of  fraud  in 

conveyances 88 

Minnesota,  decisions  in 50,  51 

Mississippi,  decisions  in 62-64 

Missouri,  decisions  in 56-58 

the  rule  in,  taken  as  a  rule  of  property  in  the  U.  S.  Court  68,  70 

Mitchell  V.  Winslow,  views  of  Story,  J.,  in 73 

Mortgage,  essentials  of  a 69,  127 

may  be  rendered  fraudulent  by  its  fraudulent  tendency,  2,  5,  78 
See  Chattel  Mortgage. 

Mortgagee  has  no  rights  under  a  conveyance  adjudged  fraudulent.  143 
cannot  seize  goods  under   mortgage   with   reserved 

poAver  of  sale 51,  52,  143 

loses  lien  if  he  license  sales  .        .        .        .        .        .  31,  34 

suffers  only  loss  of  his  lien  thereby      .        .        .        .  144 

may  preserve  lien  by  controlling  proceeds  of  all  sales 

made 4,  35,  60,  138 

trustee  must  act  solely  for  benefit  of     .         .         .         .12,  141 
sales  made  by  mortgager  merely  as  agent  of,  and  for 

benefit  of,  sustained,  35,  30,  41,  43,  46,  49,  53,  57, 

58,  75,  97, 104,137,  138,  139,  140 

if  free  from  fraudulent  intent     .        .        .53,  87 

this  a  fundamental  distinction     .         .         .  139 

may  acquire  right  to  goods  by  new  act  of  deliveryfrom 

uiortcra'jjer  ....        31,  51,  64,  144 

if  it  be  free  from  fraudulent  intent     .        .  144 


INDEX.  281 

SECTION 

Mortgagee,  mortgager  sells  as  qttasi  agent  for,  in  Kansas      .        .  100 

See    Agknt  for  Moktgagkk;    Fraud   in   Moktga- 

GKs;   Power  OF  Salk;   Trustee. 
Mortgager.    See  Assignee ;  Benefit;   Mortgagee;   Powkrof 

Sale. 
Motive.     See  Intent. 

Nebraska,  decisions  in,  as  to  reserved  power  of  sale     ...  87 
mortgager's  agency  for  mortgagee  not  sustained  in, 

unless  free  from  intent  to  defraud       ....  87 
statutes  in,  make  all  mortgages  of  chattels  without  de- 
livery in-esumptively  fraudulent          ....  87 

Nevada,  mortgages  of  chattels  limited  in 112 

New  Hampshire,  decisions  in,  on  reserved  power  of  sale       .        .  44-46 

New  Jersey,  general  rules  in,  respecting  fraud  in  conveyances     .  109 

New  York,  decisions  in,  on  reserved  power  of  sale        .        .        .  38-43 

the  question  settled  in 43 

North  Carolina,  decisions  in,  as  to  fraud  in  conveyances  generally  82 

as  to  reserved  power  of  sale    .         .   ,         84 

attempt  at  classification  of  fraud  in     .        .        .  83,  84 
reserved  power  of  sale  a  question  of  presumptive 

evidence,  in 82-85,  114 

Observers,  testimony  of,  as  to  effect  of  reserved  power  of  sale, 

4,  09,  73,  84,  122,  131,  132 

Ohio,  decisions  in 47-49 

Opera  House,  business  of,  managed  by  mortgager  of,  fraudulent  .  12 

Oregon,  decisions  in 66 

Ownership  of  property  not  separable  from  liability  for  debts.     12,  161, 162 
acts  of,  inconsistent  with  the  idea  of  se- 
curity for  debt         .         10,  12,  44,  77,  79 
are  the  evidence  of  fraud      .         .  155,  156 
effect  to  be  given  to,  to  show  the 

fraud 7,  8,  13 

reservation    of    power    of    appointment 

amounts  to  assertion  of  .         .         .         16^ 

power  of  disposal  equivalent  to, 

39,  45,  4T,  54,  77,  79,  162 
reserved  power  of  sale  invalid  in  England, 
if  tantamount  to 123 

Pennsylvania,  decisions  in 77,  78 

Pledgee  of  property  loses  his  security  by  leaving  it  in  hands  of 

pledger 96 

Policy  of  the  law,  reserved  power  of  sale  condemned  by,  44,  47,  54,  55,  61 

public,  reserved  power  of  sale  condemned  by      .         .61,  68,  128 

in  Vermont,  as  to  possession  under  conveyances  110 


282  IKDEX. 

6ECTI0N 

Policy  of  allowmg  resented  power  of  sale,  considered  .        .        .         124 

effect  of,  stated  .         .  124,  125 
arguments  ior    .        .    90,  124 
examined  .  92 

answered   .  125 

defective   views  con- 
cerning   .        .        .  126 
judicial  views  against 

130,  131,  132 
Possession,  mere,  distinguislicd  from  possession  with  power  of 

sale 4,  5,  20,  29,  54,  124 

not  fraudulent  per  se  ....         17-24,27 

17,  20,  28 

5 

5 

109 

.       17-28 

28 

Har- 

28 

19 

5,  17,  21,22 

29 

34,  79,  99,  109 

99 

cou- 

7,  99 


unimportant  as  evidence  of  fraud     . 
controversy  over  effect  of  . 
erroneous  views  concerning 
effect  of,  a  question  for  a  jury  . 
English  cases  involving 
question  of,  settled  in  England 

not  involved  in  Edwards  v. 
ben      .... 
dictum  of  Lord  Holt  concerning 
Twyne's  Case  did  not  turn  on   . 
views  of  Buller,  J.,  as  to    . 
only  a  circumstance   .  22,  23,  27,  29, 

an  unsettled  question  in  Kentucky   . 
no  real  distinction  between  absolute  and 
ditional  sales,  as  to 
delivery  of,  by  mortgager,  validates  transaction.  31,  51,  64,  144 

but  must  not  be 
colorably       for 
grantor's  ben- 
efit   .        .         .      59,  60 
nor  with  intent  to 

defraud     .        .    79,  144 
seizure  of,  by  mortgagee  who  has  allowed  mortgager 
a  power  of  sale,  confers  no  title        .        .        .       61,  52,  143 
Power  of  Appointment.    See  Appointment. 
Power  of  Disposal.     See  Disposal. 
Power  of  Revocation.     See  Revocation. 

Power  of  Sale,  Reserved,  controversy  over  effect  of      .        .        .     1,  2,  4 

distinguished  from  mere  retention  of  , 

possession    .         .         .        4,  5,  20,  29,  54,  124 

effect  of,  stated        .       4,  6,  34,  93,  122,  128,  131 

was  a  feature  of  Twyne's  Case       .        5,  6,  7,  16 

an  element  in  several  English  cases        5-13 


INDEX.  283 

SECTION 

Power  of  Sale,  Reserved,  is  invalid  in  England,  if  tantamount  to 

ownersliip 123 

characteristics  of,  as  seen  by  the  courts, 

34,  47,  G9,  73,  84,  122,  130,  131,  132 
is  fraudulent  per  se, 

35,  37,  40,  41,45,  52,  (57,  84,  155 
is  conclusively  fraudulent       ...  09 

was  fraudulent  at  connnon  law       .        .      70,  90 
the  common -law  rule  changed  by 

statute  in  Iowa         ...  90 

exhibits  actual  fraud, 

9,  43,  52,  GO,  78,  84,  117,  120,  121,  129,  131 

is  well-defined  legal  fraud      .         .         .  104 

is  not  presumptive  fraud        .        .3,43,01,117 

except  in  Mass.  90 

Me.  97 

N.  C.      82-85 

is  condemned  by  public  policy        .      01,  08,  128 

by  the  policy  of  the  law, 

44,  47,  54,  55,  01 
policy  of,  considered       .        .        .        .  124 

judicially  condemned  .  130, 131,  132 
opens  a  door  to  fraud  ...  38,  00,  01 
is  an  inlet  to  fraud  .....  80 

furnishes  an  easy  means  of  fraud  .  Ill,  132 

has  a  fraudulent  tendency, 

44,  54,  55,  57,  00,  63,  64,  77,  78,  79,  80,  131 
has  a  deceptive  character       ...      8,  131 


100 


101,  132 

9 

4,7,8 

34 

45,  131 


is  liable  to  abuse     .        .       88,  90 

is  collusive  and  covinous 

gives  delusive  credit 

makes  conveyance  felo  de  se    . 

a  kaleidoscope 

is  inconsistent  with  the  idea  of  security 

4,  10,  34,  35,  37,  41,  45,  47,  48,  50,  59,  60,  67, 

69,  74,  84,  127,  131 

is  no  real  security     .        .  4,  7,  8,  34,  47,  69,  127 

is  not  a  mortgage  in  fact,  34,  41,  47,  69,  127 

creates  fluctuating  or  shifting,  not  abso- 
lute, lien         ....       41,  47,  62,  131 

is  equivalent  to  a  power  of  revocation  .     34,  35 

is  equivalent  to  absolute  ownership 

39,  45,  47,  54,  77,  79,  162 

is  only  a  personal  security      .         .        .34,  47 

is  a  HK'i'c  expression  of  trust  and  con- 
fidence .         .         .         .      4,  39,  45,  47,  69,  138 


284  INDEX. 

SECTIOX 

Power  of  Sale,  Reserved,  is  a  ward  to  keep  off  creditors       .  4,  47,  (39 

actually  injures  creditors, 

4,  52,  54,  55,  60,  02,  G9,  93,  108 
and  benefits  grantor, 

4,  37,  41,  45,  48,  60,  62,  63,  69,  77 
for  one  day,  vitiates  tlie  transaction     .  10 

tlie  fraud  in,  is  a  question  of  law,  34,  39,  40,  41, 
44,  52,  54,  5G,  59,  02,  69,  74,  75,  77,  78,  81 
agreement  for,  is  a  question  of  fact      .  145,  140 
for  a  jury  in  disputed  cases.      50,  72,  145,  140 
mode  or  means  of  proof  of,  immaterial, 

4,  41,  43,  52,  55,  50,  00,  120,  147,  153 
may  be  ascertained  by  implication, 

35,37,56,57,67,08,75 
proved  by  evidence  aliunde, 

39,  41,  43,  45,  47,  48,  54,  55,  66,  68 
intent  of  parties  immaterial,  41,  45,  52,  53,  57, 
59,  62,  03,  74,  77,  78,  79,  84,  121,  129,  148,  151 
though  their  motives  are  pure, 

59,  02,  77,  84,  109,  148 
intent  to  defraud  sometimes  imputed  as 

a  necessary  feature  of         .        .4,  39,  51,  151 
importance  of  the  question  sometimes 

overlooked 5,  9,  126 

does  not  depend  on  lan- 
guage used  by  courts     .  16 
vitiates  a  conditional  sale       .        .        42,  61,  79' 
sale  under,  passes  title  to  vendee, 

31,  34,  54,  60,  109,  142 
registration  does  not  validate, 

4,  5,  32,  50,  54,  66,  87,  123 
mortgagee's  assumption  of  possession 

does  not  validate         .         .         .61,  52,  143 
colorable    possession    by     mortgagee 

does  not  validate         ....  11 
is  valid,  if  it  be  only  as  agent  for  mort- 
gagee, 35,  36,  41,  43,  40,  49,  53,  57,  58,  75,  97, 
104,  137,  138,  139,  140 
this  distinction  is  fundamental      .        .          139 
is  not  valid,  if  there  be  only  an  agree- 
ment to  account  for  sales     ...  9 
or  to  pay  debt  out  of  proceeds,            77 
rules  for,  are  furnished  by  cases  of  re- 
servation of  use  of  consumable  prop- 
erty       ii,  159 


INDEX . 


285 


SECTIOX 

Power  of  Sale,  Reserved,  the  fraud  in,  is  not  the  same  question 

as  intent  to  defraud  in  the  sense  of 

the  attachment  laws   ....  53 

difficulties  concerning,  in  N'tli  Carolina  84 

is  favored,  in  Michigan  .         .        .        .      88,  89 

in  Iowa         .         .        .         .      90,  91 

in  eight  States      .        .         .  114 

is  criticised  in  Alabama  .       .         .  101 

in  Maryland         .         .         .  108 

in  Georgia   .         .         .         .  Ill 

is  common  in  Massachusetts  ...  96 

in  Iowa 91' 

in  Michigan    ....  89 
in  Maine        ....            97 
is  of   occasional  occurrence  in  Mary- 
land      108 

is  only  a  badge  of  fraud,  in  Massachu- 
setts      94 

in  Kentucky    98, 114 
is  to  be  tested  by  jury,  in  Massachusetts,      94,  96 
in  Maine      .        .  97 

also  in  Alabama 
if   not    shown 
by  the  instru- 
ment,      .        .  101 
is  treated  in  Kansas  as  turning  on  good 

faith 100 

is  fatal  in  Texas,  before  a  court    .        .  104,  114 
not  before  a  jury        . 105, 114 
is  prohibited  in  Texas  by  statute  .        .  106,  114 
Presumption  not  resorted  to  in  such  cases  as  Robinson  v.  Elliott, 

3,  01,  121,  146 

except  in  Massachusetts  ...  96 

in  Maine        .        .         .        .    97,  114 

and  North  Carolina       .        .      82-85 

Presumptive  E'-idence.     See  Evidence. 

Presumptive  Fraud  and  constructive  fraud,  considered  .         .  116 

terms  defined  .         .  119 

confounded    .  117 

distinguished,  117,  119 

and  fraud  in  law  not  synonymous  terms        .  118 

fraud  in  mortgages  of  merchandise  not,  3,  43,  61,  117 

is  erroneously  supposed 

to  be     .        .        .         .  116,  118 


286  "index. 

SECTION 

Privileges,  reservation  of,  luuler  assignments  for  creditors,  a  legal 

fraud,  IGO 

immoral 
and  dis- 
honest ,  160 
Procedure,  questions  of,  and  those  of  substantive  law,  distin- 

guislK'd        .         .         .     1,  2,  48,  51,  52,  5f;,  135,  13G,  14G,  154 
modes  of,  immateruxl,  in  considering  rules  of  sub- 
stantive law 2,  4,  147,  154 

mode  of  ascertaining  fraudulent  agreement  is  a  ques- 
tion of 2,  146 

questions  of,  as  to  fraudulent  conveyances,  classified,  1 

questions  as  to  evidence  are  questions  of     .        .2,  152,  153 
Proof  of  fraudulent  agreement,  mode  or  means  of,  immaterial, 

4,  43,  147,  153 
See  Evidence. 
Property,  Rule  of,  in  the  U.  S.  Court,  the  rule  in  the  State  court 

is  a,  in  Massachusetts 4,  73 

in  Georgia 70 

in  Missouri .      68,  70 

not  in  Iowa '70 

Property,  Consumable.     See  Consumadle  Pkoperty. 
Purchasers  and  creditors,  power  of  revocation  fi'audulent  as  to 

both 157 

Qualifications,  supposed,  of  the  doctrine  of  Robinson  v.  Elliott, 

stated         .         .         ,   133,  137,  145,  152 
considered        .         .    134,137,138,145,152 

Real  Estate,  reservations  of  interest  in,  are  fraudulent         .        .  92,  158 
Registration  does  not  validate  a  reservation  of  a  power  of  sale, 

4,  5,  C,  32,  50,  54,  oG,  87,  123 

does  not  relieve  from  fraud  in  conveyances       .         .  32,  123 
immaterial  in  considering  questions  of  fraud     .     4,  54,  66,  87 

true  office  of 123 

views  of  office  of,  by  Lowell,  J.          .         .        .        .  4 

is  by  statute  equivalent  to  actual  delivery,  in  Iowa   .  90,  114 

not  in  Minnesota,  50 

or  New  Yorlv,  50 

or  Nebraska,  87 

of  convcj'ances  of  chattels  under  English  statutes    .  32 

Reservations,  fraudulent,  forms  of,  other  than  power  of  sale        .  154-1 G2 

general  principles  as  to           .         .         .  154 

vUfferent  forms  of,  stated       .         .        .  156 


INDEX. 


287 


SKCTION 

J{<;servatioiis,  fraudulent,  compared  with  power  of  disposal, 

154,  155,  156,  162 

bj^  debtor  for  his  benefit  are  fraudulent  ^)er  se          .  44,  162 
are  inconsistent  with  idea 

of  security     .         .         .  162 
of  power  of  appointment  amount  to  assertions  of 

ownership 161,  162 

held  fraudulent      ,         .  161 

of  power  of  revocation,  fraudulent  at  common  law,  157 
as  to  both  creditors    and 

purchasers       .        .         ,  157 

poison  the  transaction        .  157 

of  use  of  land,  fraudulent 02 

of  interest  in  land,  fraudulent 158 

of  use  of  consumable  propertj',  fraudulent, 

44,  50,  63,  95,  102,  159 
secure    benefits    to 

debtor          .        .  159 
furnisli  rules  for  re- 
served power  of 
sale       .         .         .44,  159 
of  rights  or  privileges  under  assignments  for  credi- 
tors, are  legal  frauds 30,  160 

are  immoral  and  dishonest  .  '       160 

Revocation,  power  of,  characteristics  of,  considered     .         .        .  157 

a  legal  fraud 95 

fraudulent  at  common  law          .         .         .  157 
as  to  both  creditors  and  pur- 
chasers .....  157 
irrespective  of  intent        .         .  95 
poisons  the  transaction  throughout   .        .  157 
reserved  power  of  sale  equivalent  to          .  34,  35 
opinion  of  Chancellor  Kent  concerning      .  157 
Rhode  Island,  the  question  of  reserved  power  of  sale  not  consid- 
ered in 107 

Rights,  reservation  of,  under  assignments  for  creditors,  a  legal 

fraud         .         , 160 

immoral  rtnd  dishonest      .        .         .        .  160 
Robinson  v.  Elliott.     See  Doctrine  of  R.  v.  E. 

R3'all  V.  Rowles,  salient  features  oi 7 


Sale.    See  Agent  of  Mortgagee;  Conditional  Sale;  Mort- 
gagee; Power  of  Sale. 
Sales,  mere  agreement  to  account  for,  does  not  validate  a  mort- 
gage with  reserved  power  of  sale       ....  9,  35,  39 


288  INDEX. 

SECTION 

Sales,  no  real  distinction  between  absolute  and  conditional,  as  to 

fraiuUileut  reservations 7,  99 

mortirager  makes,  in  Kansas,  as  quasi  agent  of  the  mort- 
gagee   100 

assignee  or  mortgagee  must  control  proceeds  of  .  4,  35,  60 

Security,  mortgage  with  power  of  sale  reserved  is  not  a  real, 

4,  7,  8,  34,  47,  69,  127 

is  delusive  as  a         .        .        .         7,  8 

is  only  a  personal    .        .         .      34,47 

not  consistent  with  the  idea  of, 

4,  10,  34,  35,  37,  41,  45,  47,  48,  50,  59,  60,  67,  69,  74,  84,  127,  131 

acts  of  ownership  are  inconsistent  with  the  idea  of        .      77,  79 

reservations  of  control  are  inconsistent  witli  the  idea  of,  162 

Stare  decisis,  importance  of  rule  of 91 

State  Court.     See  Pkoperty,  Eule  of. 

Statute  of  13  Eliz.  is  merely  declaratoi-y  of  the  common  law  5,  7,  157 
refers  to  a  legal,  not  a  moral  intent          .        .  151 
of  27  Eliz.  is  merely  declaratory  of  the  common  law,        .  157 
of  bankruptcy,  fraud  in  conveyances  is  a  question  inde- 
pendent of 68,  71 

providing  that  fraudulent  intent  shall  be  a  question  of  fact 
is  not  needed  in  order  to  make 
it  such     .         .         -74,  75,  151,  153 
is  merely  declaratory  of  tlie  law,  74 

is  not  a  statute  as  to  construc- 
tive fraud       ....  74 
does  not  limit  power  of  court  as 
to  fraud  inherent  in  a  con- 
veyance         .        .        .74,  75,  153 
except  in  Michigan,  in  cases  of 

reserved  power  of  sale  .        .  88 

and  not  in  other  cases  in  that 

State 88 

cannot  prevent  all  fraudulent 

conduct 92 

of  Iowa  makes  registration  equivalent  to  actual  delivery,    90,  114 

of  Minnesota  docs  not 50 

of  New  York  does  not 50 

of  Nebraska  does  not 87 

of  Iowa  changes  common-law  rule 90 

judicial  explanation  of 93 

does  not  change  common-law  rule  in  other  States    .        50,  54,  66 

of  Georgia  allows  mortgages  on  stocks  of  goods  in  trade,    70,  111 

taken  as  a  rule  of  property  in  the  U.  S.  court,  70 


INDEX.  289 


Statute  of  Nebraska  makes  all  mortgages  of  chattels  without  de- 
livery, presumptively  fraudulent 87 

of  Texas   prohibits   mortgages   ou  stocks  of  goods  iu 

trade 106 

limits  mortgages  of  chattels,  in  California  and  Nevada     .  112 

Story,  Judge,  views  of,  in  Mitchell  v.  Wiuslow,  as  to  reserved 

power  of  sale 73 

definition  of  constructive  fraud  by  ...         .  3 

Substantive  law  and  Adjective  law,  distinction  between, 

1,  2,  43,  51,  52,  50,  135,  136,  146,  154 
modes  or  means  of  procedure  are  immaterial,  iu 

considering  questions  of    .         .         .         •  2,  4,  147,  154 
the  controverted  questions  are  questions  of        .  1 

See  Jurisprudence. 
Summary  of  the  views  of  the  respective  State  courts,  on  the  sub- 
ject of  mortgages  of  merchandise     .        .         .  114,  122 

Tendency.    See  Fraudulent  Tendency. 

Tennessee,  decisions  in ,        .      59,  61 

Teuterden,  Lord,  views  of,  on  the  subject  of  mere  possession      .      27,  28 
Testimony  of  judicial  observers  as  to  effects  of  reserved  power 

of  sale         .         .         .         .  4-,  34,  47,  69,  73,  84,  122,  131,  13? 
Texas,  statute  in,  prohibits  mortgages  with  reserved  power  of 

sale 106,  114 

fraud  in  conveyances  a  question  of  intent  in      .        ,         .  103 

unless  appearing  ou  face  of  deed      .  103 

reserved  power  of  sale  fatal  in,  before  a  court   .        .         .104,114 

not  conclusive  before  a  jury  .        .  105,  114 

Title  passes  to  vendee,  if  mortgager  exercise  power  of  sale, 

31,  34,  54,  60,  109,  142 
Transaction  between  parties  tested,  as  to  fraud,  by  its  character- 
istics      ....    120,  121,  122,  131 
fraud  refers  to,  rather  than  to  mo- 
tives of  parties       .  43,  62,  79,  119,  121    149 
new,  between  parties.     See  Delivery. 
Trust,  expression  of,  mortgage  with  reserved  power  of  sale  is 

merely  an   .        ,        .        .4,  39,  45,  47,  69,  138 
Trustees  under  conveyance  made  as  security  must  act  of  them- 
selves       .         .      12,  35 
in  good  faith  .  141 

for  benefit  of  se- 
cured creditor   .    12,  141 
and    control    pro- 
ceeds of  sales    .  4,  35,  60 
19 


290 


INDEX. 


SECTION 

Trustees  uuder  couveyance  made  as  security  must  not  take  a  col- 
orable     posses- 
siou    .         .        .50,  60 
for  ccrantor's 

benefit       .      59,  60 
nor    collude    with 

grantor      .         .  141 

assumption  of  pos- 
session by,  will 
be  valid  if  free 
from  fraudulent 
intent  .         .  79 

maj-^  make  grantor 

their  agent,  35,  36,  41,  43 
46,  49,  53,  57,  58,  75,  97, 
104,  137,  138,  139,  140 
but    in    Nebraska 
must  show  such 
agency  to  be  free 
from  fraudulent 
intent         .         .  87 

Twyne's  Case,  mistaken  views  of 2,  4,  5 

did  not  turn  on  the  question  of  mere  possession, 

5,  17,  21,  22 
did  not  present  constructive  fraud  ...  5 

exhibited  actual  fraud 5 

fraudulent  tendency        .        .         ,         .  5 

reserved  power  of  sale  a  prominent  feature  of,     5,  6,  7,  16 
was  tested  by  its  characteristics     .        .        .         .  122 

fraudulent  intent  not  a  necessary  feature  of  .         .  5 

the  doctrine  of,  vital  in  America    ....  33 

the  origin  of  the  American  doctrine        ...  5 

doubts  as  to ;      25,  26 

Buller's  synopsis  of 21 

Lord  Eldon's  views  of 21,22 

Burnet's  views  of 7 

superseded  in  England 5,  32 


United  States  Courts,  decisions  in 

dissenting  opinions  in 
See  Property,  Rulk  ok. 

Use  only,  of  mortgaged  chattels,  not  fraudulent  in  itself. 


68-73 
4,  72 


17,  23,  26,  27,  28,  39 


INDEX.  291 


Vendee.     See  Title. 

Verdict,  court  may  direct,  in  some  States,  when  a  reserved  power 

of  sale  appears 41,42 

but  not  where  the  fact  of  its  existence 

is  disputed 72 

jury  should  And,  of  fraud,  when  evidence  wai'rants  it, 

85,  90,  109,  123 
are  urged  to  do  so,  in  North  Carolina        .         .        .84,  85 
Vermont,  the  peculiar  doctrine  in,  of  constructive  fraud  in  con- 
veyances        110 

a  rule  of  public  policy 110 

the  question  of  fraud  arising  from  a  reserved  power  of 
sale  not  a  pi'actical  one  in    ......  110 

Virginia,  decisions  in,  as  to  reserved  poAver  of  sale        .         .         .      34-37 
as  to  use  of  consumable  property,  not  har- 
monious     159 

West  Virginia,  decisions  in 67 

Wisconsin,  decisions  in 52,  53 


CASES   CITED. 


[Beferences  are  to  sections.} 


SECTION 

Abbey,  Harman  v.,  7  Ohio  St.  218. 

48,  147. 
Abbott  V.  Goodwin,  20  Maine,  408. 

73,  97,  140. 
Acker,  Smith  v.,  23  Wend.  653. 

39,  50. 
Adams  v.  Niemann,  46  Mich.  135. 

89. 
Addington  v.  Etheridge,  12  Grat. 

436.  85. 

Adler  v.  Claflin,  17  Iowa,  89.  90,  140. 
Aird,  Lukins  v.,  6  Wall.  78.  93,  158. 
Alexander,  Rea  v.,  5  Ired.  Law, 

644.  81,  119. 

Allard,  Ex  parte,  16  Ch.  D.  505.  31. 
Allen  V.  Goodnow,  71  Me.  420.  97. 
Allen  V.  McCalla,  25  Iowa,  465.  91. 
Allen  V.  Smith,  10  Mass.  308.  95. 

Alford,  Scott  v.,  53  Tex.  82. 

105, 106,  150. 
Alston,  Power  v.,  93  111.  587.  151. 

Alston,  Kavisies  v.,  5  Ala.  297.     102, 

159. 
Anderson,  Bank  v.,  24  Minn.  43-5. 

51,  144. 
Anderson,  Hedraan  v.,  6  Neb.  392. 

87,  126. 
Anderson  r.  Howard,  49  Ga.  313. 

111. 
Anderson,  Masson  v.,  3  Bax.  290.  159. 
Anonymous,  Dyer,  295.  157. 

Anonymous,  Lane,  22.  157. 

Applegate,  Oliver  v.,  5  N.  J.  L. 
479.  109. 


SECTION 
Armstrong  v.    Baldock,   1    Niel 

Gow,  33.  13. 

Armstrong  v.  Byrne,  1  Edw.  Ch. 

79.  160. 

Armstrong  v.  Tuttle,  34  Mo.  432.  66. 
Armstrong,   Weber  v.,   70    Mo. 

217.  56,  144. 

Arundel  v.  Phipps,  10  Ves.  139.  22. 
Ashfield  V.  Ashfield,  2  Vernon, 

287.  161. 

Atkinson  v.  Jordan,  5  Ohio,  293  ; 

24  Am.  Dec.  281.  160. 

Att'y-Gen'l  v.  Staff,  2  Cromp.  & 

Mees.  124.  161. 

Austin  V.  Bell,  20  Johns.  442 ;  11 

Am.  Dec.  297.  160. 

Ayres  v.  Moore,  2  Stew.  336.         102. 

Babson,  Shearer  i;.,  1  Allen,  486.  142. 
Bacon,  De  Forest  v.,  2  Conn.  633.  79. 
Bagwell,  Spence  v.,  6  Grat.  444.  35. 
Bailey,  King  v.,  6  Mo.  575.  56. 

Bailey,  King  v.,  8  Mo.  332.  56. 

Bailey  v.  Mills,  27  Tex.  434.  103. 

Bainbridge  t;.  Richmond,  17  Hun, 

391.  42. 

Bainton  v.  Ward,  2  Atk.  172.  161. 
Baker,  Field  v.,  12  Blatch.  438.  70. 
Baldock,   Armstrong  v.,  1    Niel 

Gow,  33.  13. 

Baldock,  Wooderman  v.,  8  Taunt. 

676.  25. 

Baldwin,  Carlton  v.,  22  Tex.  724. 

103. 
(293) 


294 


CASES    CITED. 


SECTION 

Baldwin  v.  Flash,  58  Miss.  593 ; 

69  Id.  61.  64,  144. 

Baldwin  v.  Peet,  22  Tex.  708.  103. 
Ball  V.  Slafter,  26  Hun,  353.  42. 

Ballard,  Sturtevunt  v.,  9  Johns. 

337  ;  6  Am.  Doc.  281.  119. 

Bam  ford  v.  Baron,  2  Term,  594.  9. 
Bank  v.  Anderson,  24  Minn.  4o5. 

51,  144. 
Bank,  Crow  v.,  52  Tex.  362.  104. 

Bank  v.  Douglas,  11  Smed.  &  M. 

469.  63,  131,  159. 

Bank  v.  Ebbert,  9  Heisk.  153. 

60,  61,  84,  122,  131,  147,  148. 
Bank  v.  Goodrich,  3  Col.  139.  65, 147. 
Bank   v.  Hampson,   L.    R.  5   Q. 

B.  D.  177.  31,  142. 

Bank,  Hawkins  v.,  1   Dill.    462. 

70,  139. 
Bank  v.  Hunt,  11  Wall.  391.  2,  71. 
Bank  v.  Inloes,  7  Md.  380.  141. 

Bank  v.  Kent,  43  Mich.  292.  89. 

Bank,  McLean  v.,  3  McLean,  623.  68. 
Bank  v.  O'Brien,  6  Hun,  231.  42. 

Bank,  Perry  v.,  27  Grat.  755. 

37, 131,  147. 
Bank  v.  Small,  7  Fed.  Pvep.  837.  70. 
Bank  v.  West,  46  Me.  15.  142. 

Bank  v.  W^estbury,  16  Hun,  458.  42. 
Banking  Co.  v.  Coleman,  3  Giff. 

11.  32. 

Banks,  Green  v.,  24  Tex.  508.  103. 
Barker  v.  Hall,  13  N.  H.  298.  139. 
Barker,   Lippincott  v.,   2    Binn. 

174;  4  Am.  Dec.  433.  160. 

Barkow  v.  Sanger,  47  Wis.  .500.  53. 
Barnard  v.  Eaton,  2  Cush.  294.  96. 
Barnes,  Janney  v.,  11  Leigh,  100. 

35,  139. 
Barnet  v.  Fergus,  51  111.  352. 

54,  55,  147. 
Barnum  v.  Hempstead,  7  Paige, 

568.  160. 

Baron,  Bamford  v.,  2  Term,  594.  ,  9. 
Barron  v.  Morris,  14  N.  B.  R.  371. 

72,  73. 
Bathurst,  Pack  v.,  3  Atk.  2G9.        161. 


6ECTI0N 

Batson,  Latimer  v.,  4  B.  &.    C. 

652.  27,  28,  79. 

Baxter  v.  Wheeler,  9  Pick.  21.  95. 
Bayard,  Chophard  v.,    4    Minn. 

533.  50. 

Bayly,  Ex  parte,  15  Ch.  D.  223.  31. 
Bayntun,  Dewey  v.,  6  East,  257.  23. 
Beers  v.  Botsford,  13  Conn.  146. 

79, 119. 
Bekey,  AVelsh  v.,  1  Penn.  67.  77, 148. 
Belford  v.   Crane,  16   N.  J.  Eq. 

265.  109. 

Bell,  Austin  v.,  20  Johns.  442;  11 

Am.  Dec.  297.  160. 

Benner,  Southard  v.,  72  N.  Y.  424. 

43,  122,  147. 
Benton  v.  Thornhill,  7  Taunt.  149. 

14. 
Bentz  V.  Hockey,  69  Penn.  St.  71.  77. 
Bethel  v.  Stanhope,  Cro.  Eliz.  810. 

157. 
Bevan,  Pvose  v.,  10  Md.  466.  108. 

Bidwell,  Gay  v.,  7  Mich.  519. 

4,  59,  88,  116,  125,  146. 
Bigelow  V.  Stringer,  40  Mo.  195.  151. 
Billingsley  v.  Bunce,  28  Mo.  547.  56. 
Birchard,  David  v.,  53  Wis.  492.  53. 
Bishop,  Scharfenburg  v.,  36  Iowa, 

60.  91. 

Bishop  V.  Warner,  19  Conn.  460. 

79,  80,  148. 
Bisselt'. Hopkins,  3  Cow.  166;  15 

Am.  Dec.  259.  5. 

Blackstone,  Lavender  v.,   2  Lev. 

14G;  SKeb.  526.  157. 

Blades,  Reed  v.,  5  Taunt.  212.  12. 
Blake,  Muir  v.,  57  Iowa,  662.  91. 

Blakeslee  v.  Rossman,  43    Wis. 

116.  51,  52,  53,  122,  143,  148. 

Blodgett,  Ranlett  o).,  17  N.  H.  298 ; 

Am.  Dec.  603.  45,  131,  147. 

Bloom,  In  re,  17  N.  B.  R.  425. 

68,  69,  72,  131. 
Boardman  v.  Halliday,  10  Paige, 

223.  160. 

Bodwing,  Garden  v.,  9  W.  Va. 
121.  67, 147. 


CASES    CITED. 


295 


SECTION 

Body,  Owen  v.,  5  Ad.  &  E.  28.  141. 
Bolland,  Ex  parte,  21  Ch.  D.  543.  30. 
Bonesteel  v.  Flack,  41  Barb.  435.  42. 
Booe,  Young  v.,  11  Ired.  L.  347. 

82,  84. 
Book  Co.  V.  Sutherland,  10  Neb. 

334.  87,  139. 

Boone  v.  Hardie,   83  N.  C.  470. 

84,  150. 
Booth,  Martindale  v.,  3  B.  &  Ad. 

498.  28,  79. 

Both,  Phillips  v.,  58  Iowa,  499.  91. 
Botsford,  Beers  v.,  13  Conn.  146. 

79,  119. 
Boud  V.  Bronson,  80  Pa.  St.  3G0.  78. 
Bourne  v.  Dodson,  1  Atk.  157.  7. 

Bowen  i'.  Clark,  1  Biss.  128 ;  6 

A.  L.  Reg.  203.  68. 

Boyd,  Spies  v.,  1  E.  D.  Smith, 

445.  42, 

Brackett    v.   Harvey,   91    N.   Y. 

214;   17   Cent.  L.  J.   112;    26 

Hun,  602.  43. 

Bremer  v.  Fleckenstein^  9    Ore. 

266.  66. 

Brett  V.  Carter,  2  Low.  458. 

4,  5,  54,  116,  118,  123,  125,  130,  146. 
Bridge,  Jessup  v.,  11  Iowa,  572.  90. 
Briggs  V.  Parkman,  2  Mete.  258  ; 

37  Am.  Dec.  89.  96. 

Briggs,  Williams  v.,  11 R.  1. 476.  107. 
Brinton  v.  Hook,  3  Md.  Ch.  477.  158. 
Bristol,  People  v.,  85  Mich.  28.  89. 
Brockenbrough  v.  Brockenbrough, 

81  Grat.  580.  159. 

Bronson,  Boud  v.,  80  Pa.  St.  360.  78. 
Brooks  V.  Wimer,  20  Mo.  503. 

66,  57,  148. 
Brown,  Eastwoods.,  1  Ryan&M. 

312.  27,  28. 

Brown  v.  Piatt,  8  Bosw.  324.  144. 

Brown,  Steel  v.,  1  Taunt.  381.  24. 
Brown  v.  Thompson,  59  Me.  872.  97. 
Brown  v.  Webb,  20  Ohio,  389.  49. 
Bucknall  v.  Roiston,  Prec.  in  Ch. 

285.  16,  19,  108. 

Bullock,  Standen  v.,  8  Coke,  82.     157. 


SECTION 

Bunce,  Billingsley  v.,  28  Mo.  547.  66. 
Bunce,   Stanley   v.,  27  Mo.  269. 

66,  147. 
Burd  V.  Smith,  4  Dall.  76.  160. 

Burgess,  Triebert  v.,  1 1  Md.  452.  108. 
Buriey,  Marsh  v.,  13  Neb.  261.  87. 
Burnell,  Gale  t;.,  7  Q.  B.  850,  30. 

Burnside,  Maple  v.,  22  Ind.  139.  74. 
Burrows,  In  re,  7  Biss.  526 ;  5  C. 

L.  J.  241.  68,  69,  131. 

Butler  V.  Rahm,  46  Md.  541.  108. 

Butler  V.  Stoddard,  7  Paige,  163.  39. 
Butler,   Stoddard  v.,    20  Wend. 

607.  39. 

Byern,  Donnell  v.,  69  Mo.  468.  58. 
Bjn-ne,  Armstrong  v.,  1  Edw.  Ch. 

79.  160. 

Cadell,  Mace  v.,  1  Cowp.  232.  6. 

Cadogan  v.  Kennett,  2  Cowper, 

432.  20. 

Cad  well  v.  Pray,  41  Mich.  307.  89. 
Cagle,  Hilliard  v.,  46  Miss.  309. 

63,  131,  148. 
Cairns,  Mackie  v.,  5  Cow.  547 ;  15 

Am.  Dec.  477.  158. 

Calkins  v.  Lockwood,   16  Conn. 

276 ;  41  Am.  Dec.  143.  79. 

Cameron  v.  Marvin,  26  Kan,  612. 

100. 
Campbell  v.  Leonard,  11    Iowa, 

489.  90. 

Cannon  «.  Peebles,  4  Ired.  Law, 

204.  81,  157. 

Cantrell,  In  re,  6  Ben.  482.  68. 

Carlton  v.  Baldwin,  22  Tex.  724.  103, 
Carnes  v.  Piatt,  1  Sweeney,  147.  42. 
Carpenter  v.  Mayer,  5  Watts,  483. 

77. 
Carpenter  v.  Simmons,  1    Rob. 

360.  42. 

Carpet  Co.,  Kendall  v.,  13  Conn. 

383,  139. 

Carter,  Brett  v.,2  Low.  458. 

4,  5,  54,  116,  118,  128,  125,  130,  146. 
Catlin  V,  Currier,  1  Saw.  7, 

68,69,131,  143,  147. 


290 


CASES   CITED. 


SECTION' 

Cator  V.  Collins,  2  Mo.  Ap.  225.  67. 
Chandler,  Melody  v.,  12  Me.  '282. 

97,  140. 
Chapin  v.  Cram,  40  Mo.  561.  97. 

Chapman,   Graham  v.,  12  C.  B. 

85.  30,  151. 

Chapman,  Sleeper  v.,  121  Mass. 

404.  90. 

Charlton  v.  Lay,  5  Hum.  495.  159. 
Cheatham  v.  Hawkins,  76  N.  C. 

335.  84,  104,  132,  150. 

Cheatham  v.  Hawkins,  80  /(/.  161. 

84,  150. 
Chisolm  V.  Chittenden,  45  Ga.  213. 

111. 
Chittenden,  Chisolm   v.,  45    Ga. 

213.  111. 

Chophard  v.  Bayard,  4  Minn.  533.  50. 
Christie,  Keables  v.,  47  Mich.  594.  89. 
Cigar  Co.  V.  Foster,  36  Mich.  368.  89. 
Claflin,  Adler  v.,  17  Iowa,  89. 

90,  140. 
Clark,  Bowen  v.,  1  Biss.   128 ;  5 

A.  L.  Reg.  203.  68. 

Clark  V.  Hymun,  55  Iowa,  14;  39 

Am.  Rep.  160.  91. 

Clarke,  Hyslop  v.,  14  Johns.  458. 

160. 
Clay,  Walker  v.,  42  L.  T.  (n.  s.) 

369.  31,  142. 

Cleaves  v.  Herbert,  61  111.  126.  55. 
Clemence,   Flood  v.,    106   Mass. 

299.  96. 

Clemence,  Folsom  v.,  Ill  Mass. 

273.  96. 

Cliver  v.  Applegate,  5  N.  J.  Law, 

479.  109. 

Clow  V.  Woods,  5  S.  &  R.  275 ;  9 

Am.  Dec.  346.  77,  78,  148. 

Coate  V.  Williams,  9  Eng.  L.  & 

E.  481.  140. 

Cobb,  Deering  v.,  74  Me.  332.  97. 
Cobb  V.  Farr,  16  Graj-,  597.  96. 

Coburn  v.  Pickering,  3  N.  H.  415 ; 

14  Am.  Dec.  375.  44,  48. 

Cochran  v.  Paris,  11  Grat.  348.  159 
Codman  v.  Freeman,  3  Cush.  306.    95. 


SECTION 

Codwise,  Sands  v.,  4  Johns.  536 ; 

4  Am.  Dec.  305.  6. 

Coleman,  Banking  Co.  v.,  8  Giff. 

11.  32. 

Collins,  Cator  v.,  2  Mo.  Ap.  225.  57. 
Collins,  Moore  v.,  3  Dev.   Law, 

126.  81. 

Collins  V.  Myers,   16  Ohio,  547. 

47,  52,  63,  66,  84,  87,  111,  116,  122, 

131,  147. 

Co'dver,  Leland  v.,  34  Mich.  418.     89. 

Colter,  Rose  v.,  76  Ind.  590.  76. 

Commonwealth   v.   Damon,    105 

Mass.  580.  96. 

Commonwealth,  Shannon  v.,  8  S. 

&  R.  444.  157. 

Commonwealth    v.    Strangford, 

112  Mass.  289.  96. 

Conkling  v.  Shelly,  28  N.  Y.  360. 

41,  43. 
Conkwright,  Smith  v.,  28  Minn, 

23.  158. 

Constantine  v.  Twelves,   29  Ala. 

607.  101. 

Cook  V.  Corthell,  11  R.  L  482  ;  23 

Am.  Rep.  518.  107,  144. 

Coolidge  V.  Melvin,  42  N.  H.  510. 

44,  158. 
Cooper,  Garman  v.,  72  Penn.  St. 

32.  77,  151. 

Cooper,  Smith  v.,  27  Hun,  565.  42. 
Copeland,  Cutter  v.,  18  Me.  127.  97. 
Corbett,  Hunter  v.,  7  Up.  Can.  Q. 

B.  75.  28. 

Cornish,  Flower  v.,  25  Minn.  473. 

5L 
Cornwallis,  Lassells  v.,  2  Vernon, 

465.  161. 

Corthell,   Cook  v.,  11  R.  L  482 ; 

23  Am.  Rep.  518.  107,  144. 

Cory,  Hughes  v.,  20  Iowa,  899. 

4,  90,  91,  92,  93,  120,  130. 
Cotton  V.  Marsh,  3  Wis.  221.  53, 139. 
Cox  V.  Jackson,  1  Hay.  423.  81. 

Cram,  Chapin  v.,  40  Me.  561.  97. 

Crane,  Belford  v.,  16  N.  J.  Eq. 

265.  109. 


CASES    CITED. 


297 


SECTION 

Crane,  Harvey  v.,  2  Biss.  496 ;  5 

N.  B.  11.  218.  70. 

€raver  v.  Miller,  65  Penn.  St.  456.  78. 
Crawcour  v.  Salter,  18  Ch.  D.  30.  31. 
Crittenden,  Nicol  v.,  55  Ga.  497. 

111. 
Crooks  V.  Stuart,  2  McCra.  13 ;  7 

Fed.  Kep.  800.  68,  70. 

Crow  V.  Bank,  52  Tex.  362.  104. 

Crudup,   Richmond    v.,   Meigs, 

581 ;  33  Am.  Dec.  164.  159. 

Crutsinger,  Ross  v.,  7  Mo.  245.  56. 
Cunningham  v.  Freeborn,  11 

Wend.  240.  74,  151. 

Currier,  Catlin  v.,  1  Saw.  7. 

68,  69,  131,  143,  147. 
Curtis  y.  ■Wilc9x,  49  Mich.  425.  89. 
Curts,  Phelps  v.,  80  111.  109.  151. 

Gushing,   Johnson  v.,  15  N.  H. 

298;  41  Am.  Dec.  694  IGl. 

Cutter  V.  Copeland,  18  Me.  127.  97. 
Cuttings.  Cutting,  86  N.  Y.  522.  161. 
Cutting  V.  Jackson,  56  N.  H.  253. 

44,  159. 

Dade,  Rock  v.,  May  Fraud.  Conv. 

520.  157. 

Damon,  Commonwealth  v.,  105 

Mass.  580.  96- 

Daniel  v.  Morrison,  6  Dana,  182. 

99,  114. 
Daniels  v.  Nelson,  41  Vt.  161.  110. 
Darvill  v.  Terry,  6  H.  &  N.  812.  32. 
Darwin  v.  Handley,  3  Yerg.  502.  159. 
Davenport   v,   Foulke,    68    Ind. 

382 ;  34  Am.  Rep.  265.  75,  76, 147. 
David  V.  Birchard,  53  Wis.  492.  53. 
Davidson,  Fox  v.,  1  Mackey,  102 ; 

9  Wash.  L.  Rep.  263.  "^  68,  147. 
Davis,  Jarvis  v.,  14  B.  Mon.  529.  98. 
Davis  V.  Ransom,  18  111.  396.  54,  147. 
Davis,   Woodrow  v.,  2  B.  Mon. 

298.  98. 

Deering  v.  Cobb,  74  Me.  332.  97. 

De  Forest  v.  Bacon,  2  Conn.  633.  79. 
Delaware  v.  Ensign,  21  Barb.  85. 

42,  51,  143. 


SECTION 

Delop  V.   Windsor,  26  La.  An. 

185.  113. 

DeMattos,   Worseley  v.,  1  Burr. 

467.  8,  119,  122,  131. 

Desenberg,  Willison  v.,  41  Mich. 

156.  89. 

Deuster,  Steinart  v.,  23  Wis.  136. 

52,  147. 
Devon,  Morris  v.,  2  Disney,  218. 

48. 
Dewey  v.  Bayntun,  6  East,  257.  23. 
Dewey  v.  Littlejohn,  2  Ired.  Eq. 

495.  82,  159. 

Dibrell,   Gait   v.,    10  Yerg.   145. 

59,  131,  148. 
Divver  v.  McLaughlin,    2  Wend. 

59G;  20  Am.  Dec.  655.  S8,  13L 

Doane    v.   GaS-retson,    24  Iowa, 

351.  91. 

Dodds  V.  Johnson,   3  Thomp.  & 

C.  215.  42. 

Dodson,  Bourne  v.,  1  Atk.  157.  7. 

Doe  dem.   Otley   v.  Manning,  9 

East,  64.  119. 

Doe,  Jenners  v.,  9  Ind.  461.  74. 

D'Oench,   State  v.,  31  Mo.  453. 

57,  58. 
Dolliver,  Thompson  v.,  132  Mass. 

103.  96,  141. 

Donalson,  Ingles  v.,  2  Hay.  57.  81. 
Donnell  v.  Byern,  69  Mo.  468.  58. 
Donovan  v.  Dunning,  69  Mo.  436. 

158. 
Dorr,  Wolfe  v.,  24  Me.  104.  97. 

Douglas,  Bank  v.,  11  Smed.  &M. 

4G9.  63,  131,  159. 

Downing,  Henderson  v.,  24  Miss. 

106.  158. 

Downs,  Goodrich  v.,  6  Hill,  438. 

74,  151. 
Doyle    V.   Smith,    1    Coldw.  15. 

59,  60,  141. 
Dudley's  (Sir  Robert)  Case,  Lane, 

42.  157. 

Dunham  v.  Waterman,  17  N.  Y. 

9.  151. 

Dunlap,  Spence  v.,  6  Lea,  457.     151. 


298 


CASES   CITED. 


SECTIOX 

Dunning,  Donovan    v.,  69    Mo. 

430.  158. 

Dunning  v.  Mead,  90  111.  376.  55. 

Dustin,  Pettee  v.,  58  N.  H.  309. 

88,  144. 
Dutcher  v,  Swartwood,  15  Hun, 

31.  42,  143. 

Earle,  Hungerford  v.,  2  Vernon, 

201.  158. 

Earraan,  Sipe  v.,  26  Grat.  563.  159. 
Eastwood  V,  Brown,  1  Ryan  &  M. 

312.  ^  27,  28, 

Eaton,  Barnard  v.,  2  Cush.  294.  96. 
Eaton,  Oliver  v.,  7  Mich.  108.  88. 
Ebbert,  Bank  v.,  9  Heisk.  153. 

60,  61,  84,  122,  131,  147,  148. 
Edgell  V.  Hart,  9  N.^ST.  213;  18 

Barb.  380.  41,  43,  147. 

Edmundson,  Kissam  v.,  1  Ired. 

Eb.  180.  81,  158. 

Edwards  v.  Harben,  2  Term,  587. 

9,  17,  28,  29,  34,  131. 
Edwards  v.  Stinson,  59  Ga.  443.  111. 
Elam,  Morgan  v.,  4  Yerg.  438.  119. 
Eklridge,  In  re,  2  Biss.  362.  70. 

Eldridge,  Passmore   v.,  12   Serg. 

&  R.'  198.  160. 

Ellett,  Frankhouser   v.,  22  Kan. 

127;  31  Am.  Eep.  171.        100,  132. 
Elliott,  Robinson  v.,  22  Walk  513.    2, 

4,  28,  51,  66,  70,  72,  74,  75,  99,  103, 

116,  119,  122,  123, 131, 143,  144, 145. 
Ellison,  Tallon  v  ,  3  Keb.  63.  87. 

Elmes  V.  Sutherland,  7  Ala.  262. 

102,  159. 
Ely,  Smith  v.,  10  N.  B.  E.  553. 

68,  143. 
Ensign,  Delaware  v.,  21  Barb.  85. 

42,  51,  143. 
Ersfeild,  Garth  v.,  J.  Bridgman, 

22.  157. 

Ervin,  Jacobs  v.,  9  Ore.  52.  00. 

Estill,  Vanmeter  v.,  78  Ky.  456.  99. 
Etheridge,  Addingtonv.,  12  Grat. 

436.  35. 

Evans  v.  Scott,  89  Penn.  St.  136.     78. 


SECTION 

Evans,  Spackman  v.,  L.  R.  3  Eng. 

&  I.  App.  171.  151. 

Evans,  Williams  v.,  6  Neb.  216.  87. 

Ex  parte  Allard,  16  Ch.  D.  505.  31. 

Ex  parte  Bayly,  15  Ch.  D.  223.  31. 

Ex  parte  Bolland,  21  Ch.  D.  643.  30. 
Ex  parte  Games,  L.  R.  12  Ch.  D. 

314.  30. 
Ex  parte  Popplewell,  21  Ch.  D. 

73.  30. 
Ex  parte  Symmons,  14  Ch.  D. 

693,  31. 

Ex  parte  Williams,  11  Ves.  3.  22. 

Farmers'  Bank  v.  Douglas,  11  S, 

&  yi.  469.  63,  131,  159. 

Farnsworth    v.  Shepard,    6  Vt, 

521.  '  110. 

Farr,  Cobb  v.,  16  Gray,  597.  96, 

Fergus,  Barnet  v.,  51  111.  352. 

54,  55,  147. 
Fern,  Payne  v.,  L.  R.  6  Q.  B.  D. 

620.  31, 

Field  V.  Baker,  12  Blatch.  438.        70. 
Field,  Lyons  v.,  17  B.  Mon.  543. 

98. 
Fisher  v.  Henderson,  8  N,  B.  R. 

175.  158, 

Fisk  V.  Harshaw,  45  Wis.  665. 

53,  55,  139. 
Flack,  Bonesteel  v.,  41  Barb.  435.  42. 
Flash,  Baldwin  v.,  58  Miss,  593 ; 

59  Id.  01.  64,  144. 

Fleckenstein,  Bremer  v.,  9  Ore, 

266.  66. 

Fletcher    v.    Powers,  131   Mass. 

333.  94. 

Flood  V.  Clemence,  106  Mass.  299. 

96. 
Flower  v.  Cornish,  25  Minn.  473.  51. 
Flower,  Mann  v„  25  Minn.  500.  51- 
Foerstel,  Thompson  v.,  .10    Mo. 

Ap.  290.  57. 

Fogg,  Janvrin  v.,  49  N.  H.  340. 

51,  143,  144. 
Folsom  V.  Clemence,  111  Mass. 

273.  96. 


CASES    CITED. 


299 


SECTIOX 

Forbes,  In  re,  6  Biss.  510. 

68,  143,147. 
Ford  V.  "Williams,  24  N.  Y.  359. 

41,  43,  139. 
Foster,  Cigar  Co.  v.,  36  Mich.  368. 

89. 
Foster  v.  Manufg.  Co.,  12  Pick. 

451.  95. 

Foster  v.  Wallace,  2  Mo.  231.  56. 

Fosters.  Woodfin,  11  Ired.  Law, 

339.  SI. 

Foulke,    Davenport  v.,  68    Ind. 

382 ;  34  Am.  Kep.  265.     75,  76,  147. 
Fox  V.  Davidson,  1  JMackey,  102 ; 

9  "Wash.  L.  Rep.  263.  68,  147. 

Frankhouser  v.  Ellett,  22   Kan. 

127;  31  Am.  Kep.  171.        100,  132. 
Franklin,  Wilt©.,  1   Binn.502;  2 

Am.  Dec.  474.  78,  151. 

Freeborn,     Cunningham     v.,    11 

Wend.  240.  74,  151. 

Freeman,  Codman  v.,  3  Cush.  306. 

95. 
Freeman  v.  Rawson,  5  Ohio  St.  1. 

48,  74. 
Frost  V.  Warren,  42  N.   Y.  204. 

41,  43. 

Gaither,  Sangston  v.,  3  Md.  40. 

160. 
Gale  V.  Burnell,  7  Q.  B.  850.  30. 

Gait  V.  Dibrell,  10  Yerg.  145. 

59,  131,  148. 
Games,  Ex  parte,  L,  R.  12  Ch.  D. 

14.  30. 

Garden  v.  Bodwing,    9  W.  Va. 

121.  67,  147. 

Gardner  v.  Johnston,  9  W.  Va. 

403.  67,  147. 

Gardner  v.  McEwen,  19  N.  Y.  123. 

41,  43. 
Garman  v.  Cooper,  72  Penn.   St. 

32.  77,  151. 

Garretson,  Doane  v.,  24  Iowa,  351. 

91. 
Garth  v.  Ersfeild,  J.  Bridgman,  22, 

157. 


SECTION 

Gay   V.  Bidwell,  7  Mich.  519. 

4,  59,  88,  116,  125,  146. 
Geesaman,  Hower  v.,  17  S.  &  R. 

251.  77. 

George  v.  Milbanke,  9  Ves.  Jr. 

190.  161. 

Gere  v.  Murray,  6  Minn.  305.  50. 

Gibbs  V.  Thompson,  7  Hum.  179. 

158. 
Giles,  Palmer  v.,  5  Jones  Eq.  75. 

81,  158. 
Gill,  Haselinton  v.,  3  Term,  620.  29. 
Gilmore,   Googins  v.,  47  Me.  9. 

97,  150. 
Goodenough  v.  Harris,  1  Disney, 

53.  48. 

Goodheart  v.  Johnson,  88  111.  58. 

55,  139. 
Goodman,  Woodward  v.,  3  Cent. 

L.  J.  43.  60,  141. 

Goodnow,  Allen  v.,  71  Me.  420.    97. 
Goodrich,   Bank  v.,  3  Colo.  139. 

65,  147. 
Goodrich  v.  Downs,  6   Hill,  438. 

74,  151. 
Goodrich  t?.  Williams,  50  Ga.  425. 

Ill,  132. 
Goodtitle  v.  Otway,  2  Wilson,  6.  IGl. 
Goodwin,  Abbott  v.,  20  Me.  408. 

73,  97,  140. 
Googins  V.  Gilmore,  47   Me.    9. 

97,  150. 
Gorham,  Meyer  v.,  5  Cal.  322.  112. 
Graham  v.  Chapman,  12  C.  B.  85. 

30,  151. 
Graham,  Metzner  v.,  57  Mo.  404. 

58,  139. 
Grant,  Mining  Co.  v.,  17  Ch.  D. 

122.  151. 

Graves,  White  v.,  68  Mo.  218.        57. 
Greeley  v.  Reading,  74  Mo.  309. 

57,  144. 
Green  v.  Banks,  24  Tex.  508.  103., 
Green  v.  Trieber,  3  Md.  11.  160. 

Greon,  Wade  v.,  3  Hum.  546.         159. 
Greenebaum  v.  Wheeler,  90  111. 
296.  55,  131. 


300 


CASES   CITED. 


SECTION 

Gregory  v.  Perkins,  4Dev.  Law, 

50.  81. 
Gregory  v.  Whedon,  8  Neb.  373.  87. 
Grimshawr.  Walker,  12  Ala.  101.  160. 
Griswold  v.  Sheldon,  4  K  Y.  581. 

4,  40,  84,  116. 
Grover  v.  Wakeman,  11  Wend. 

187.  151,  160. 

Grover,  Wakeman  v.,  4  Paige,  23. 

160. 
Grubham,  Stone  v.,  2  Bulst.  225.  18. 
Guild,  McCombs  v.,  9  Lea,  81.        61. 

Hafner  v.  Irwin,  1  Ired.  Law,  490. 

81. 
Hall,  Barker  v.,  13  N.  H.  298.  139. 
Hall  V.  Webb,  28  Mo.  408.  56. 

Halliday,  Boardman  v.,  10  Paige, 

223.  160. 

Hamilton  v.  Rogers,  8  Md.  301.  108. 
Hampson,   Bank  v.,  L.  R.  5   Q. 

B.  D.  177.  31,  142. 

Handley,  Darwin  v.,  3  Yerg.  502.  1 59. 
Hankins  v.  Ingols,  4  Blackf.  35.  74. 
Harben,  Edwards  v.,  2  Term,  587. 

9,  17,  28,  29,  3i,  131. 
Hardie,  Boone  v.,  83  N.  C.  470. 

84,  150. 
Harding,  Lockwood  v.,  79  Ind.  129. 

75,  76,  139. 
Hardy  v.  Simpson,  13  Ired.  Law, 

132.  83. 

Hardy  v.   Skinner,  9  Ired.  Law, 

191.  82,  83,  84. 

Harman  v.  Abbey,  7  Ohio  St.  218. 

48,  147. 
Harman  v.  Hoskins,  56  Miss.  142. 

62,  63,  04,  131,  144,  147,  148. 
Harris,  Goodenough  v.,  1  Disney, 

53.  "     48. 

Harris,  Leadman  v.,  3  Dev.  Law, 

144.  81. 

Harris  v.  Sumner,  2  Pick.  129.  95. 
Harshaw,  Fisk  v.,  45  Wis.  665. 

53,  55,  139. 
Hart,  Edgell  v.,  9  N.  Y.  213 ;  13 
Barb.  380.  41,  43,  147. 


SECTION 

Harvey,    Brackett  v.,   91   N.    Y. 

214;  17  Cent.  L.  Jour.  112;  25 

Hun,  502.  43. 

Harvey  v.  Crane,  2  Biss.  496 ;   5 

N.  B.  11.  218.  70. 

Haselinton  v.  Gill,  3  Term,  620.  29. 
Hasslock,  McCrasly  v.,  4  Bax.  1.  60. 
Hawkins?;.  Bank,  1  Dill.  402.  70, 139. 
Hawkins,  Cheatham  v.,  76  N.  C. 

335.  84,  104,  132,  150. 

Hawkins,    Cheatham   v.,    80   Id. 

161.  84,  150. 

Haworth,  Shattuck  v.,  91  Penn. 

St.  449.  78. 

Hayden,  Torbert  v.,  11  Iowa,  435. 

90,  92,  132. 
Hazen,  Ludden  v.,  31  Barb.  650.  42. 
Hazzard,  Richards  v.,  1  Stew.  & 

P.  139.  102. 

Hedman  v.  Anderson,  6  Neb.  392, 

87,  126. 
Hempstead,  Barnum  v.,  7  Paige, 

568.  160. 

Henderson  v.  Downing,  24  Miss. 

106.  158. 

Henderson,  Fisher  v.,  8  N.  B.  R. 

175.  158. 

Hendricks  v.  Mount,  5  N.  J.  Law, 

738.  109. 

Herbert,  Cleaves  v.,  61  111.  126.  55. 
Hewson  v.  Tootle,  72  Mo.  632. 

56,  58,  139. 
Hickman  v.  Perrin,  6  Cold.  135. 

59,  125. 
Hill,  Marks  v.,  15  Grat.  400.  30,  139. 
Hill,  Winkley  v.,  9  N.  H.  31 ;  31 

Am.  Dec.  215.  44. 

Hilliar(J  v.  Cagle,  46  Miss.  309. 

63,  131,  148. 
Hinton  v.  Toye,  1  Atk.  465.  161. 

Hoffman  v.  Pitt,  5  Esp.  22.  23. 

Holmes  v.  Marshall,  78  N.  C.  262. 

84,  150. 
Holt,  Howerton  v.,  23  Tex.  51.  103. 
Hombeck  v.  Vanmetre,  9   Ohio, 

153.  48. 

Hood,  Sibley  v.,  3  Mo.  290.  56. 


CASES    CITED. 


301 


SECTION 

Hook,  Brinton  v.,  3  Md.  Ch.  477.  158. 
Hopkins,  Bissel  v.,  3  Ck)w.  166; 

15  Am.  Doc.  259.  5. 

Hopkins,  McFadden  v.,  81    Ind. 

459.  76. 

Horton,  Sommerville   v.,  4  Yer. 

640 ;  26  Am.  Dec.  242.     59,  95,  159. 
Horton    v.    Williams,  21    Minn. 

187.  50,  52,  64,  87,  147. 

Hoskins,  Harman  v.,  56  Miss.  142. 

62,  63,  64,  131,  144,  147,  148. 
Houston  V.  Howard,  39  Vt.  54.  110. 
Howard,  Anderson  v.,  49  Ga.  313. 

111. 
Howard,  Houston  v.,  39  Vt.  54.  110. 
Howard,  Trotter  v.,  1  Hawks,  320.  81. 
Hower  v.  Geesaman,  17  S.  &  R. 

251.  77. 

Howerton  v.  Holt,  23  Tex.  51.  103. 
Hubbard  v.  Lyman,  8  Allen,  520.  142. 
Hudson  V.  Warner,  2  Har.  &  Gill, 

415.  108. 

Huggeford,  Jones  v.,  3  Met.  515. 

96,  140. 
Hughes  V.  Cory,  20  Iowa,  399. 

4,  90,  91,  92,  93,  120,  130. 
Hungerford  v.  Earle,  2  Vernon, 

261.  158, 

Hunt,   Bank  of  Leavenworth  v., 

11  Wall.  391.  2,  71. 

Hunter  v.  Corbett,  7  Up.  Can.  Q. 

B.  75.  28. 

Hurst,  Smith  v.,  10  Hare,  30.  157. 
Hyman,  Clark  v.,  55  Iowa,  14 ;  39 

Am.  Rep.  160.  91. 

Hyslop  V.  Clarke,  14  Johns.  458.     160. 

Ingersoll,  Kirby  v.,  1  Harr.   Ch. 

172;  1  Doug.  (Mich.)  477.  151. 

Ingles  V.  Donalson,  2  Hay.  57.  81. 
Ingols,  Hankins  v.',  4  Blackf.  35.  74. 
Ingram,  Jezeph  v.,  8  Taun.  838. 

25,  28. 
Inloes,  Bank  v.,  7  Md.  380.  141. 

Insurance  Co.  v.  Wilcoxson,  21 

Ind.  856.  74,  75,  147. 

Irwin,  Hafner  v.,  1  Ired.  Law,  490.    81. 


SECTION- 

Jackson,  Cox  v.,  1  Hay.  423.  81. 

Jackson.  Cutting  v.,  66  N.  H.  253. 

44,  169. 
Jackson  v.  Parker,  9  Cow.  73.  158. 
Jacob,  State  v.,  2  Mo.  Ap.  183.  57. 
Jacobs  V.  Ervin,  9  Ore.  52.  66. 

Janes  v.  Whitbread,  6  Eng.  L.  & 

E.  431.  140. 

Janney  v.  Barnes,  11  Leigh,  100. 

35,  139. 
Janvrin  v.  Fogg,  49  N.  H.  340. 

51,  143,  144. 
Jarman   v.  WooUoton,  3   Term, 

618.  29. 

Jarvis  v.  Davis,  14  B,  Mon.  529.  98. 
Jenkins,  Simmons  v.,  76  111.  479.  55. 
Jenkyn  v.  Vaughan,  3  Drewry, 

419.  157. 

Jenners  v.  Doe,  9  Ind.  461.  74. 

Jerenson,  Rice  v.,  54  Wis.  248.  53. 
Jessup  V.  Bridge,  11  Iowa,  672.  90. 
Jezeph  V.  Ingram,  8  Taun.   838. 

25,  28. 
Johnson   v.    Cushing,    15  N.   H. 

298;  41  Am.  Dec.  694.  161. 

Johnson,  Dodds  v.,  3  Thomp.  &  C. 

215.  42. 

Johnson,  Goodheart  v.,  88  111.  58. 

55,  139. 
Johnson  v.  Patterson,  2  Woods, 

443.  70. 

Johnson  v.  Thweatt,  18  Ala.  741. 

101,  160. 
Johnson  v.  AVhitwell,  7  Pick.  71.  95. 
Johnston,  Gardner  v.,  9  W.  Va. 

403.  67,  147. 

Jones  V.  Huggeford,  3  Met.  615. 

96,  140. 
Jones,  Miller  v.,  15  N.  B.  R.  150.  72. 
Jones,   Pennington   v.,  57   Iowa, 

37.  91. 

Jordan,  Atkinson  v.,  5  Ohio,  293 ; 

24  Am.  Dec.  281.  160. 

Jordan  v.  Lendrum,  55  Iowa,  478.  93. 
Jordan  v.  Turner,  3  Blackf.  309.  74. 
Joseph  V.  Levi,  58  Miss.  843.  64, 144. 
Judd,  Mattison  v.,  69  Miss.  99.      141. 


302 


CASES    CITED. 


SECTION 

Kahley,  Ke,  2  Biss.  383 ;  4  N.  B. 

K.  124,  378.  68,  69,  147. 

Katzenbergor,  Kleine  v.,  20  Ohio 

St.  110;  5  Am.  Rep.  630.  49, 139. 
Keables  v.  Christie,  47  Mich.  594.  89. 
Kellj',  Mittnachti).,  3  Keyes,  407. 

41,131. 
Kenan,  King  v.,  38  Ala.  03.  101. 

Kendall  v.  Carpet  Co.,  13  Conn. 

383.  139. 

Kennett,  Cadogan  v.,  2  Cowper, 

432.  20. 

Kenney,  Smith  v.,  1  Mackey,  12 ; 

9  Wash.  L.  Eep.  69.  68. 

Kent,  Bank  v.,  43  Mich.  292.  89. 

Kerr,  Quarles  v.,  14  Grat.  48.         159. 
Kidd  V.  Rawlinson,  2  Bos.  &  Pul. 

59.  21,  22. 

Killian,  Turner  v.,  12  Neb.  580.     87. 
King  V.  Bailey,  6  Mo.  575.  56. 

King  V.  Bailey,  8  Mo.  332.  56. 

King  V.  Kenan,  38  Ala.  63.  101. 

King  V.  Nottingham,  Lane,  42.     157. 
Kirby  v.  Ingersoll,  1  Harr.  Ch. 

172 ;  1  Doug.  (Mich.)  477.  151. 

Kirkbride,  Re,  5  Dillon,  116.     68,  70. 
Kissam  v.  Edmundson,  1  Ired.  Eq. 

180.  81,  158. 

Kleine  v.  Katzenberger,  20  Ohio 

St.  1 10 ;  5  Am.  Rep.  630.  49,  139. 
Knight,  Wiley  v.,  27  Ala.  336. 

102, 159. 
Kramer,  Wormanu.,  73  Penn.  St. 

378.  78. 

Kuhn  V.  Mack,  4  W.  Va.  186.    67, 147. 

Laing  v.  Perrott,  48  Mich.  298.       89. 
Lang  V.  Lee,  3  Rand.  410. 

34,  67, 122,  131,  142,  147,  157. 
Lang  V.  Stockwell,  55  N.  H.  561. 

44,  160. 
Langsdorf,  Voorhis  v.,  31  Mo.  451. 

56. 
Langworthy,   Place  v.,    13  Wis. 

629.  52,  147. 

Lassells  v.  Cornwallis,  2  Vernon, 
465.  161. 


SECTION 
Latimer  v.  Batson,  4  B.  &  C.  652. 

27,  28,  79. 
Lavender  v.  Blackstone,  2  Lev. 

146 ;  3  Keb.  626.  157. 

Lay,  Charlton  v.,  5  Hum.  495.       159. 
Leadman  v.  Harris,  3  Dev.  Law, 

144.  81. 

Leavitts,   Smith  v.,    10  Ala.  92. 

101, 132. 
Lee,  Lang  v.,  3  Rand.  410. 

34,  67, 122,  131,  142,  147,  157. 
Leighton,  Preston  v.,  6  Md.  88.  108. 
Leland  v.  Collver,  34  Mich.  418.  89. 
Lendrum,  Jordan  v.,  55  Iowa,  478. 

93. 
Lentilhon  v.  Moffat,  1  Edw.  Ch. 

451.  160. 

Leonard,  Campbell  v.,  11  Iowa, 

489.  90. 

Leonard,  Wilhelmi  v.,  13  Iowa, 

830.  90. 

Letts,  Mobley  v.,  61  Ind.  11. 

75,  76,  147,  148. 
Levi,  Joseph  v.,  68  Miss.  843.  64, 144. 
Levy  V.  Welsh,  2  Edw.  Ch.  438. 

39,  40. 
Lewis  V.  McCabe,  49  Conn.  141 ; 

21  A.  L.  Reg.  217.  61,  79. 

Lippincott  v.  Barker,  2  Bin,  174 ; 

4  Am.  Dec.  433.  160. 

Littlejohn,  Dewey  v.,  2  Ired.  Eq. 

495.  82,  159. 

Littleton,  Tyrer  v.,  2  Brownlow, 

187.  157. 

Lockwood,    Calkins  v.,  16  Conn. 

276  ;  41  Am.  Dec.  143.  79. 

Lockwood  V.   Harding,  79   Ind. 

129.  .  75,  76,  139. 

Lockwood,  Miller  v.,  32  N.  Y.  293. 

41,  43,  139. 
Lodge  V.  Samuels,  60  Mo.  204. 

66, 147. 
Lombe,  Steward  v.,  1  Brod.  &  B. 

606.  26. 

Looker   v.   Peckwell,   38  N.  J. 

Law,  253.  109. 

Louthain  v.  Miller,  85  Ind.  161.     76. 


CASES   CITED. 


;)03 


SECTION- 

Lowry,  Wood  v.,  17  Wend.  492. 

39,  40,  41,  50,  71,  87,  148. 
Ludden  v.  Hazen,  31  Barb.  650.  42. 
Lukins  v.  Aird,  6  Wall.  78.  93,  158. 
Lyman,  Hubbard  v.,  8  Allen,  520. 

142. 
Lyons  v.  Field,  17  B.  Mon.  543.       98. 

Macdona  v.  Swiney,  8  Irish  L.  Rep. 

73.  "  29. 

Mace  V.  Cadell,  1  Cowp.  232.  5. 

Mack,  Kuhn  v.,  4  W.  Va.  186. 

67,  147. 
Mack,  Sparks  v.,  31  Arks.  666. 

86,  160. 
Mackason's  Appeal,  42  Penn.  St. 

330.  158. 

Mackie  v.  Cairns,  5  Cow.  547 ;  15 

Am.  Dec.  477.  158. 

Macomber  v.  Parker,  14  Pick.  497. 

73,  95. 
Macomber  v.  Peck,  39  Iowa,  351. 

93,  158. 
Maddox,  Martin  v.,  24  Mo.  575.  56. 
Manly,  In  re,  2  Bond,  261 ;  3  N. 

B.E.  75,  291.  68,143,147. 

Mann  v.  Flower,  25  Minn.  500.       51. 
Manning,  Doe  dem.  Otley  v.,  9 

East.  64.  119. 

Manning,  Pierson  v.,  2  Mich.  445. 

88,  114,  160. 
Manufactg.  Co.,  Foster  v.,  12  Pick. 

451.  95. 

Maple  V.  Burnside,  22  Ind,  139.       74. 
Marbury,  Tarback  v.,  2  Vernon, 

510.  157. 

Marks  v.  Hill,  15  Grat.  400.     36,  139. 
Marqueze,  Richardson  v.,  59  Miss. 

80;  42  Am.  Rep.  353.  141. 

Marsh  v.  Burley,  13  Neb.  261.         87. 
Marsh,    Cotton  v.,   3   Wis.   221. 

53,  139. 
Marshall,  Holmes  v.,  78  N.  C.  262. 

84,  150. 
Marston  v.  Vultee,  8  Bosw.  129. 

42,  148. 
Martin  v.  Maddox,  24  Mo.  575.        56. 


SECTTON 

Martin,  Mclvibbinv.,  64  Penn.  St. 

352 ;  3  Am.  Rep.  588.  78,  148. 

Martin  v.  Rice,  24  Mo.  581.  56. 

JNIartindale  v.  Booth,  3  B.  «fc  Ad. 

498.  28,  79. 

Marvin,  Cameron  v.,  26  Kan.  612. 

100. 
Masson  v.  Anderson,  3  Bax.  290.  159. 
Mattison  v.  Judd,  59  Miss.  99.  141. 
Mayer,  Carpenter  v.,  5  Watts,  483.  77. 
Maynard,  Pratt  v.,  116  Mass.  388.  96. 
Mazange,  Price  v  ,  31  Ala.  701. 

101,132. 
McCabe,  Lewis  v.,  49  Conn.  141 ; 

21  Am.  L.Eeg.  217.  61,  79- 

McCalla,  Allen  v.,  25  Iowa,  465,  91. 
McCombs  V.  Guild,  9  Lea,  81.  61. 
McCrasly  v.  Haislock,  4  Baxt.  1.  GO. 
McEwen,  Gardner  v.,  19  N.  Y. 

123.  41,43. 

McFadden  v.   Hopkins,   81   Ind. 

459.  76. 

McKeand,  Taylor  v.,  L.  R.  5  C.  P. 

Div.  358.  81. 

McKibbin  v.  Martin,  64  Penn.  St. 

352 ;  3  Am.  Rep.  588.  78,  148. 

McLachlan  v.  Wright,  3  Wend. 

848.  38. 

McLaughlin,  Divver  v.,  2  Wend. 

596 ;  20  Am.  Dec.  655.  88,  131. 

McLaughlin  v.  Ward,  77  Ind.  383. 

75,  76. 
McLean  v.  Bank,  3  McLean,  623.  68. 
McLean,  Smith  v.,  10  N.  B.  R. 

260.  68,  147. 

Mead,  Dunning  v.,  90  111.  376.  55. 
Meade  v.  Smith,  16  Conn.  346.  79. 
Meggot  V.  Mills,  1  Ld.  Ray.  286.  19. 
Mefody  w.  Chandler,  12  Me.  282. 

97,  140. 
Melvin,  Coolidgew.,  42  N.  H.  510. 

44,  158. 
Mercer  v.  Peterson,  L.  R.  2  Exch. 

304.  32. 

Metzner  v.  Graham,  57  Mo.  404. 

58,  139. 
Meyer  v.  Gorham,  5  Cal.  322.        112. 


304 


CASES   CITED. 


SECTION 

Milbanke,  George  v.,  9  Ves.  Jr. 

190.  161. 

Milburn  v.  Waugh,  11  Mo.  369.      56. 
Miller,  Crarer  v.,  65  Penn.   St. 

456.  78. 

Miller  v.  Jones,  15  X.  B.  R.  150.     72. 
Miller  r.  Lockwood,  32  ]^.  Y.  293. 

41,  43,  139. 
Miller,  Louthain  v.,  85  Ind.  161.  76. 
Miller  ads.  Pancoast,  29  N.  J.  Law, 

250.  109,  142. 

Mills,  Bailey  v.,  27  Tex.  434.  103. 

Mills,  Meggot  v.,  1  Ld.  Kay.  286.     19. 
Mining  Co.  v.  Grant,  17  Ch.  D.  122. 

151. 
Mining  Co.  v.  Smith,  L.  R.  4  Eng. 

&  I.  Ap.  64.  151. 

Mitchell,  Simpson  v.,  8  Yer.  416. 

59,  159. 
Mitchell  V.  Stetson,  64  Ga.  442.  111. 
Mitchell  V.  Winslow,  2  Story,  630. 

47,  56,  70,  73,  130. 
Mittnacht  y.  Kelly,  3  Keyes,  407. 

41,  131. 
Mobley  v.  Letts,  61  Ind.  11. 

75,  76,  147,  148. 
MoflFat,  Lentilhon  v.,  1  Edw.  Ch. 

451.  160. 

Monk,  Peacock  v.,  1  Ves.  sr.  127. 

157. 
Moore,  Ayres  v.,  2  Stew.  336.  102. 
Moore  v.  Collins,  3  Dev.  Law,  126. 

81. 
Moore  v.  Wood,  100  111.  451.  151. 
Morgan  v.  Elam,  4  Yerg.  438.  119. 
Morrill,  In  re,  2  Saw.  356 ;  8  N. 

B.K.  117.  68,143,147. 

Morris,  Barron  v.,  14  N.  B.  R.  371. 

72,  73. 
Morris  v.  Devon,  2  Disney,  218.  48. 
Morris  v.  Stern,  80  Ind.  227.  76. 

Morrison,  Daniel  v.,  6  Dami,  182. 

99,  114. 

Morrow  v.  Reed,  30  Wis.  81.         144. 

Morton,  Vernon  v.,  8  Dana,  247.     98. 

Mount,  Hendricks  v.,  5  N.  J.  Law, 

738.  109. 


SECTION 

Mueller,  State  v.,  10  Mo.  App.  87. 

57. 
Muir  V.  Blake,  57  Iowa,  662.  91. 

Munch,   Stein  v.,  24  Minn.  390. 

51,  143,  147. 
Murray,  Gere  v.,  6  Minn.  805.  50. 
Murray,  Phelps  v.,  2  Tenn.  Ch. 

746.  61,  128,  131. 

Murray,  Riggs  v.,  2  Johns.  Ch. 

565.  ^  121,  157,  160. 

Murray  v.  Riggs,  15  Johns.  571.  157. 
Myers,  Collins  v.,  16  Ohio,  547. 

47,  52,  63,  66,  84,  87,  111,  116, 
122,131,147. 

Nailer  v.  Young,  7  Lea,  735.  60,  147. 
Nash  V.  Norment,  5  Mo.  Ap.  545. 

57,  144. 
Nelson,  Daniels  v.,  41  Vt.  161.  110. 
Nicol  V.  Crittenden,  55  Ga.  497.  111. 
Niemann,  Adams  v.,  46  Mich.  135. 

89. 
Norment,  Nash  y.,  5Mo.  Ap.  &45. 

57,  144. 
Nottingham,  The  King  v.,  Lane, 
42.  167. 

O'Brien,  Bank  v.,  6  Hun,  231.  42. 
Ogden  V.  Stewart,  29  111.  122.  54,  1 42. 
Oliver  v.  Eaton,  7  Mich.  108.  88. 

Oliver  v.  Town,  28  Wis.  328.  52. 

Olmsted,  Yates  v.,  56  N.  Y.  632 ; 

65  Barb.  43.  41,  55. 

Orton  V.  Orton,  7  Or.  478.  66,  147. 
Osgood,  Putnam  v.,  51  N.  H.  192 ; 

52N.  H.148.    45,131,147,148,159. 
Otley,  Doe  dem.,  v.  Manning,  9 

East,  64.  119. 

Otway,  Goodtitlew.,  2  Wilson,  6. 

161. 
Overman  v.  Quick,  8  Biss.  134. 

70,  139. 
Owen  V.  Body,  5  Ad.  &  E.  28.       141. 

Pack  V.  Bathurst,  3  Atk.  269.  161. 
Paget  V.  Perchard,  1  Esp.  205. 

10, 41, 122. 


CASES    CITED. 


305 


SECTION 

Palmer  v.  Giles,  5  Jones  Eq.  75. 

81,  158. 
Pancoast,  Miller  ads.,   29  N.   J. 

Law,  250.  109,  142. 

Paris,  Cochran  v.,  11  Grat.  348.  159. 
Parker,  Jackson  v.,  9  Cow.  73.  158. 
Parker,  Macomber?;.,  14  Pick.  497. 

73,  95. 
Parker,  Bobbins  v.,  3  Mete.  117. 

95,  124,  159. 
Parkman,  Briggs  v.,  2  Met.  268  ; 

37  Am.  Dec.  89.  96. 

Partridge  v.  White,  59  Me.  564.  97. 
Passmore  v.  Eldridge,  12  S.  &  R. 

198.  160. 

Patterson,  Johnson  v.,  2  Woods, 

448.  70. 

Payne  v.  Fern,  L.  R.  6  Q.  B.  D. 

620.  31. 

Peacock  v.  Monk,  1  Ves.  sr.  127.  157. 
Peacock  v.  Tompkins,  Meigs,  317.  59. 
Peck,  Macomberu.,  39  Iowa,  351. 

93,  158. 
Peckwell,   Looker  v.,   38  N.    J. 

Law,253.  109. 

Peebles,  Cannon  v.,  4  Ired.  Law, 

204.  81,  157. 

Peet,  Baldwin  v.,  22  Tex.  708.  103. 
Peiser  v.  Peticolas,  60  Tex.  638 ; 

32  Am.  Ptep.  621.  103,  104,  106. 
Pelletier,  Keed  i;.,  28  Mo.  173.  56. 
Pence,  Stephens  v.,  56  Iowa,  257.  91. 
Pennell,  Sawyer  v.,  19  Me.  167.  97. 
Pennington  v.  Jones,  57  Iowa,  37.  91. 
People  V.  Bristol,  35  Mich.  28.  89. 
Perchard,  Paget  v.,  1  Esp.  205. 

10,  4i,  122. 
Perkins,  Gregory  v.,  4  Dev.  Law, 

50.  81. 

Perrin,  Hickman  v.,  6  Cold.  135. 

59,  125. 
Perrin,  In  re,  7  N.  B.  R.  283.  68. 

Perrott,  Laing  v.,  48  Mich.  298.  89. 
Perry  v.  Bank,  27  Grat.  755. 

37,131,  147. 
Peterson,  Mercer  v.,  L.  R.  2  Exch. 
304.  32. 


SECTION 

Peticolas,  Peiser  v.,  50  Tex.  638 ; 

32  Am.  Rep.  621.        103,  104,  106. 
Pettee  v.  Dustin,  58  N.  H.  309. 

88,  144. 
Pettibone  v.  Stevens,  15  Conn.  19; 

38  Am.  Dec.  57.  79,  80,  119. 

Phelps  V.  Curts,  80  111.  109.  151- 

Phelps  V.  Murray,  2  Tenn.  Ch. 

746.  61,  128, 131. 

Phillips  V.  Both,  58  Iowa,  499.  91. 
Phipps,  Arundel  v.,  10  Ves.  139.  22. 
Pickering,  Coburn  v.,  3  N.  H.  415 ; 

14  Am.  Dec.  375.  44,  48. 

Pierson  v.  Manning,  2  Mich.  445. 

88,  114,  160. 
Pinckney,  Southard  v.,  6  N.  Y. 

W.  D.  328.  43. 

Pintard,  Watkins  v.,  1  N.  J.  Law, 

378.  109. 

Pitt,  HoflFman  v.,  5  Esp.  22.  23. 

Pitzer,  Price  v.,  44  Md.  521.  108. 

Place  V.  Langworthy,  18  Wis.  629. 

5_>,  147. 
Piatt,  Brown  v.,  8  Bosw.  324.  144. 
Piatt,  Carnes  v.,  1  Sweeny,  147.  42. 
Popplewell,  Ex  parte,  21  Ch.  D. 

73.  30. 

Potter,  Rocheblave  v.,  1  Mo.  561 ; 

14Am.  Dec.  805.  56. 

Powell  V.  Preston,  1  Hun,  513.       42. 
Power  V.  Alston,  93  111.  587.  151. 

Powers,  Fletcher  v.,  131  Mass.  833. 

94. 
Pratt  V.  Maynard,  116  Mass.  388.  96. 
Pray,  Cadwell  v.,  41  Mich.  307.  89. 
Prescott,  Weeks  v.,  53  Vt.  57.  110. 
Preston  v.  Leighton,  6  Md.  88.  108. 
Preston,  Powell  v.,  1  Hun,  613.  42. 
Price  V.  Mazange,  31  Ala.  701. 

101,  182. 
Price  V.  Pitzer,  44  Md.  521.  108. 

Putnam  v.  Osgood,  61  N.  H.  192; 
52  N.  H.  148.    45, 131, 147, 148, 159. 

Quarles  v.  Kerr,  14  Grat.  48.         169. 
Quick,  Overman  v.,  8  Biss.  134. 

70,  139. 


306 


CASES   CITED. 


SECTIOX 

Rahm,  Butler  v.,  46  Md,  541.  108. 
Railroad,  Kobson  v.,  37  Mich.  70.  89. 
Raleigh's  (Sir  Walter)  Case,  Lane, 

42.  157- 

Ranlett  v.  Blodgett,  17  N.  H.  298 ; 

43  Am.  Dec.  603.  45,  131,  147. 

Ransom,  Davis  v.,  18  111.  396.  54,  147. 
Ravisies  v.  Alston,  5  Ala.  297. 

102,  159. 
Rawlinson,  Kidd  v.,  2  Bos.  &  Pul. 

59.  21,  22. 

Rawson,  Freeman  v.,  5  Ohio  St.  1. 

48,  74. 
Re  Bloom,  17  N.  B.  R.  425. 

68,  69,  72,  131. 
Re  Burrows,  7  Biss.  626;    5   C, 

L.  J.  241.  68,  69,  131. 

Re  Cantrell,  6  Ben.  482.  68. 

Re  Eldridge,  2  Biss.  362.  70. 

Ee  Forbes,  5  Biss.  510.  68,  143,  147. 
Re  Kahley,  2  Biss.  383  ;  4  N.  B.  R. 

124,  378.  68,  69,  147. 

Re  Kirkbride,  5  Dillon,  116.  68,  70. 
Re  Manly,  2  Bond,  261 ;  3  N.  B. 

R.  75,  291.  68,  143, 147. 

,Re  Morrill,  2  Saw.  356 ;  8  N.  B. 

R.  117.  68,  143,  147. 

Re  Perrin,  7  N.  B.  R.  283.  68. 

Rea  V.  Alexander,  5  Ired.  Law, 

644.  81,  119. 

:Read  v.  Wilson,  22  111.  377.  54. 

Reading,  Greeley  v.,  74  Mo.  309. 

57,  144. 
Reed  v.  Blades,  5  Taunt.  212.  12. 

Reed,  Morrow  v.,  30  Wis.  81.  144. 
Reed  v.  Pelletier,  28  Mo.  173.  56. 

Reynolds  v.  Welch,  47  Ala.  200. 

102,  150. 
Rice  V.  Jerenson,  54  Wis.  248.  53. 
Rice,  Martin  v.,  24  Mo.  581.  56. 

Rice,  Rowley  v.,  1 1  Met.  333.  96,  144. 
Richards  v.  Hazzard,  1  Stew.  &  P. 

139.  102. 

Richardson  v.  Marqueze,  59  Miss. 

80;  42  Am.  Rep.  3.")3.  141. 

Richmond,  Bainbridge  v.,  17  Hun, 
391.  42. 


8k:;tion 
Richmond  v.  Crudup,  Meigs,  581 ; 

33  Am.  Dec.  164.  159. 

Riggs,  Murray  ij.,  15  Johns.  571.     157. 
Riggs  V.  Murraj-,  2  Johns.  Ch.  566. 

121,  167,  160. 
Robbins  v.  Parker,  3  Mete.  117. 

95,  124,  159. 

Robinson  v.  Elliott,  22  Wall.  513.     2, 

4,  28,  51,  66,  70,  72,  74,  75,  90,  103, 

116,  119, 122, 123, 131,  143, 144,  146. 

Robson  V.  Railroad,  37  Mich.  70.     89. 

Rocheblave  v.  Potter,  1  Mo.  561 ; 

14  Am.  Dec.  305.  56. 

Rock  V.  Dade,  May  Fr.  Conv.  620. 

157. 
Rockey,  Bentz  v.,  69  Penn,  St.  71.  77. 
Rogers,  Hamilton  v.,  8  Md.  301.  108. 
Roiston,  Bucknall  v.,  Free,  in  Ch. 

285.  15,  19,  108. 

Rolle,  Ryall  v.,  1  Wils.  260. 

7,  15, 19,  34,  77,  131. 
Roos,  Summers  v.,  42  Miss.  749 ;  2 

Am.  Rep.  653.  63. 

Rose  V.  Bevan,  10  Md.  466.  108. 

Rose  V.  Colter,  76  Ind.  590.  76. 

Ross  V.  Crutsinger,  7  Mo.  245.        56. 
Ross  V.  AVilson,  7  Bush,  29.  98. 

Ross  V.  Young,  5  Sneed,  627.        159. 
Rossman,   Blakeslee  v.,  43  Wis. 

116.  51,  52,  53,  122,  143,  148. 

Rowles,   Ryall  v.,  1  Yes.  sr,  348; 
1  Atk.  165;  1  Wils.  260. 

7,  15,  19,  34,  77,  131. 
Rowley  v.  Rice,  11  Met.  333.  96,  144. 
Russell  V.  Winne,  37  N.  Y.  591. 

41,  43,122,  131,  148. 
Russell  V.  Woodward,  10  Pick.  408. 

96. 
Ryall  V.  Rowles,   1  Yes.  sr.  348 ; 
1  Atk.  165;  1  Wils.  260. 

7,  15,  19,  34,  77, 131. 

Salter,  Crawcour  v.,  18  Ch.  D.  30.   3L 
Samuels,  Lodge  v.,  50  Mo.  204. 

56,  147. 
Sands  v.  Codwise,  4  Johns.  636 ; 
4  Am.  Dec.  305.  5. 


CASES    CITED. 


307 


SECTION 

Sanger,  Barkow  v.,  47  "Wis.  500.  53. 
Sangston  v.  Gaither,  3  Md.  40.  160. 
Saunders  v.  Turbeville,  2  Hum. 

272.  59. 

Sawyer  v.  Pennell,  19  Me.  167.  97. 
Sawyer  v.  Turpin,  91  U.  S.  114.  4. 
Scharfenburg  v.  Bishop,  35  Iowa, 

60.  91. 

Scott  V.  Alford,  53  Tex.  82. 

105,  106,  150. 
Scott,  Evans  v.,  89  Penn.  St.  136.  78. 
Scott,   Whallon    v.,    10    Watts, 

237.  141. 

Shannon  v.  Commonwealth,  8  S. 

&  R.  444.  157. 

Shattuck  V.  Haworth,  91  Penn. 

St.  449.  78. 

Shearer  v.  Babson,  1  Allen,  486.  142. 
Sheldon,   Griswold  v.,   4  N.  Y. 

581.  4,  40,  84,  116. 

Shelly,  Conkling    v.,    28   N.   Y. 

360.  41,  43. 

Shepard,  Farnsworth    v.,   6   Vt. 

521.  110. 

Shepherd  v.  Trigg,  7  Mo.  151.  56. 
Sheppards  v.  Turpin,  3  Grat.  357. 

35,  131,  147. 
Shurtleff  v.   Willard,    19    Pick. 

202.  95,  159. 

Sibley  v.  Hood,  3  Mo.  290.  56. 

Sibley,  Wingler  v.,  35  Mich.  231.  89. 
Sill,  Tallmadge  v.,  21  Barb.  34.  161. 
Simmons,   Carpenter  v.,  1  Rob. 

360.  42. 

Simmons  v.  Jenkins,  76  111.  479.  65. 
Simpson,  Hardy  v.,  13  Ired.  Law, 

132.  83. 

Simpson  v.  Mitchell,  8  Yer.  416. 

59,  159. 
Sipe  V.  Earman,  26  Grat.  563.  159. 
Skinner,  Hardy  v.,  9  Ired.  Law, 

191.  82,  83,  84. 

Slafter,  Ball  v.,  26  Hun,  353.  42. 

Slater,  Spencer  v.,  L.  R.  4  Q.  B. 

D.  13.  30. 

Sleeper  v.  Chapman,  121  Mass. 
404.  96. 


SECTION 

Small,  Bank  v  ,  7  Fed.  Rep.  837.    70. 
Smith  V.  Acker,  23  Wend.  653. 

39,  50. 
Smith,  Allen  v.,  10  Mass.  308.  05. 

Smith,  Burd  v.,  4  Dall.  76.  160. 

Smith  V.  Conkwright,  28  Minn. 

23.  158. 

Smith  V.  Cooper,  27  Hun,  665,  42. 
Smith,  Doyle  v.,  1  Cold.  15. 

59,  60,  141. 
Smith  V.  Ely,  10  N.  B.  R.  653.  68,  143. 
Smith  i;.  Hurst,  10  Hare,  30.  157 

Smith  V.  Kenney,  1  Mackey,  12 ; 

9  Wash.  Law  Rep.  69.  68. 

Smith  V.  Leavitts,  10  Ala.  92. 

101,  132. 
Smith   V.  McLean,  10  N.  B,  R. 

260.  68,  147. 

Smith,  Meade  v.,  16  Conn.  346.  79. 
Smith,  Mining    Co.  v.,  L.  R.   4 

Eng.  &  L  Ap.  64.  151. 

Smith,  Wordall  y  ,  1  Camp.  332. 

11,  27. 
Snodgrass,  West  v.,  17  Ala.  549.  157. 
Sole,  Stephens  v.,  1  Atk.  157.  '  7. 
Sommerville  v.  Horton,   4  Yer. 

540 ;  26  Am.  Dec.  242.     59,  95,  159. 
Southard  v.  Benner,   72    N.  Y. 

424.  43,  122,  147. 

Southard  v.  Pinckney,  6  N.   Y. 

W.  D.  328.  43. 

Spackman  v.  Evans,  L.  R.  3  Eng. 

&  L  Ap.  171.  151. 

Sparks  v.  Mack,  31  Arks.  666.  86, 160. 
Spence  v.  Bagwell,  6  Grat.  444.  35. 
Spence  v.  Dunlap,  6  Lea,  457.  151. 
Spencer  v.  Slater,  L.  R.  4  Q.  B. 

D.  13.  30. 

Spies    V.   Boyd,  1   E.  D.  Smith, 

445.  42. 

Staff,  Att}'.  Genl.  v.,  2  Cromp.  & 

Mees.  124.  161. 

Stafford  v.  Whitcomb,  8  Allen, 

518.  142. 

Standen  v.  Bullock,  3  Coke,  82.     157. 
Stanhope,  Bethel  v.,    Cro.  Eliz. 
810.  157. 


308 


CASES   CITED. 


SECTIOX 

Stanley  v.  Bunce,  27  Mo.  269.    56,  147. 
State  V.  D'Oench,  31  Mo.  453.     57, 58. 
State  V.  Jacob,  2  Mo.  Ap.  183.        57. 
State  V.  Mueller,  10  Mo.  App.  87.  75. 
State  V.  Tasker,  31  Mo.  445. 

56,  57,  148. 
Stedman  v.  Vickery,  42  Me.  132.  97. 
Steel  V.  Brown,  1  Taunt.  381.  24. 
Stein  V.  Munch,  24  Minn.  390. 

51,  143,  147. 
Steinart  v.  Deuster,  23  Wis.  136. 

52,  147. 
Stephens  v.  Pence,  56  Iowa,  257.  91. 
Stephens  v.  Sole,  1  Atk.  157.  7. 

Stern,  Morris  v.,  80  Ind.  227.  76. 

Stetson,  Mitchell  v.,  64  Ga.  442.     111. 
Stevens,  Pettibone  v.,  15  Conn. 

19;  38  Am.  Dec.  57.  79,  80,  119. 
Steward  v.  Lombe,  1  Brod.  &  B. 

506.  26. 
Stewart,  Ogden  v.,  29  111.  122. 

54,  142. 
Stinson,  Edwards  v.,  59  Ga.  443.  111. 
Stockwell,  Lang  v.,  55  N.  H.  561. 

44,  160. 
Stoddard    v.   Butler,   20  Wend. 

507.  39. 
Stoddard,  Butler  v.,  7  Paige,  163.  39. 
Stone  V.  Grubham,  2  Bulst.  225.  18. 
Strangford,    Commonwealth    v., 

112  Mass.  289.  96. 

Stringer,  Bigelowu.,40  Mo.  195.    151. 
Stuart,  Crooks  v.,  2  McCra.  13 ; 

7  Fed.  Eep.  800.  68,  70. 

Sturtevant  v.  Ballard,  9  Johns. 

337;  6  Am.  Dec.  281.  119. 

Sullivan,  Wilson  v.,  58   N.  H. 

260.  46,  139. 

Summers  v.  Koos,  42  Miss.  749 ; 

2  Am.  Kep.  653.  63. 

Sumner,  Harris  v.,  2  Pick.  129.    95. 
Sutherland,  Book  Co.  v.,  10  Neb. 

334.  87,  139. 

Sutherland,  Elmes  v.,  7  Ala.  262. 

102,  159. 
Swartwood,  Butcher  v.,  15  Hun, 

31.  42,  143. 


SECTION 

Swiney,  Macdona  v.,  8  Irisli  L. 

Hep.  73.  29. 

Symmons,  Ex  parte,  14  Cli.  D. 

693.  31. 

Tailbois,  Wimbish  v.,  Plowden, 

38.  121,  149. 

Tallmadge  v.  Sill,  21  Barb.  34.    161. 
Tallon  V.  Ellison,  3  Neb.  63.  87. 

Tarback  v.  Marbury,  2  Vernon, 

510.  157. 

Tasker,  State  v.,  31  Mo.  445.     . 

66,  57,  148. 
Taylor  v.  McKeand,  L.  E.  5  C.  P. 

Div.  358.  31. 

Terry,  Darvill  v.,  6  H.  &  N.  812.    32. 
Thompson,  Brown   v.,    59    Me. 

372.  97. 

Thompson  v.  Dolliver,  132  Mass. 

103.  96,  141. 

Thompson  v.   Foerstel,    10  Mo. 

Ap.  290.  57. 

Thompson,   Gibbs    v.,    7    Hum. 

179.  158. 

Thompson  v.  Towne,  2  Vernon, 

319.  161. 

Thornhill,  Benton  v.,    7  Taunt. 

149.  14. 

Thweatt,  Johnson  v.,  18  Ala.  741. 

101,  150. 
Tickner  v.  Wiswall,  9  Ala.  305.  101. 
Ticknor,  Wiswall  v.,  6  Ala.  178.  101. 
Tompkins,   Peacock    v.,    Meigs, 

317.  59. 

Tootle,  Hewson  v.,  72  Mo.  632. 

56,  58,  139. 
Torbert  v.  Hayden,  11  Iowa,  435. 

90,  92,  132. 
Town,  Oliver  v.,  28  Wis.  328.  52. 
Towne,  Thompson  v.,  2  Vernon, 

319.  161. 

Townshend  v.  Windham,  2  Ves. 

sr.  1.  161. 

Toye,  Hinton  v.,  1  Atk.  465.  161. 

Trieber,  Green  v.,  3  Md.  11.  160. 

Triebert  v.  Burgess,  11  Md.  452.     108. 
Trigg,  Shepherd  v.,  7  Mo.   151.    66. 


CASES    CITED. 


309 


SECTIOX 

Trotter  v.  Howard,  1  Hawks,  320.   81. 
Troui^hton  v.  Troughton,  3  Atk. 

656.  IGl. 

Turbeville,  Saunders  v.,  2  Hum. 

272.  59. 

Turner,  Jordan  v.,  3  Blackf.  309. 

74. 
Turner  v.  Killian,  12  Neb.  580.  87. 
Turpin,  Sawyer  v.,  91  U.  S.  114.  4. 
Turpin,   Sheppards   v.,  3    Grat. 

357.  35,  131,  147. 

Tuttle,   Armstrong    v.,   34    Mo. 

482.  56. 

Twelves,  Constantine  v.,  29  Ala. 

607.  101. 

Twyne's  Case,  3  Coke,  80. 

4,  5,  6,  16,  17,  21,  29,  81,  122,  131. 
Tyrer  v.  Littleton,  2  Brownlow, 

187.  157. 

Vanmeter  v.  Estill,  78  Ky.  456.  99. 
Vanmetre,  Hombeck  v.,  9  Ohio, 

153.  48. 

Vanpelt  v.  Veghte,  14  N.  J.  Law, 

207.  109. 

Vaughan,  Jenkyn  v.,  3  Drewry, 

419.  157. 

Veghte,   Vanpelt   v.,    14   N.    J. 

Law,  207.  109. 

Vernon  v.  Morton,  8  Dana,  247.  98. 
Vickery,  Stedman  v.,  42  Me.  132.  97. 
Voorhis  v.  Langsdorf,  31  Mo.  451.  56. 
Vultee,  Marston  v.,  8  Bosw.  129. 

42,  148. 

Wade  I'.  Green,  3  Hum.  546.  159. 
Wakeman,  Grover  v.,  11  Wend. 

187.  151,  160. 

Wakeman  v.   Grover,   4  Paige, 

23.  160. 

Walker  v.  Claj^  42  L.  T.  (n.  s.) 

369.  31,  142. 

Walker,  Grimshaw  v.,   12   Ala. 

101.  160. 

Wallace,  Foster  v.,  2  Mo.  231.  56. 
Walter  v.  Wimer,  24  Mo.  63.  56, 
Ward,  Bainton  v..  2  Atk.  172.        161. 


SECTION 

Ward,  McLaughlin   v.,  77   Ind. 

383.  75,  76. 

Warner,  Bishop  v.,  19  Conn.  460. 

79,  80,  148. 
Warner,  Hudson   v.,    2   Har.  & 

Gill,  415.  108. 

Warren,  Frost  v.,  42  N.  Y.  204. 

41,  43. 
Waterman,   Dunham   v.,   17   N. 

Y.  9.  151. 

Watkins  v.  Pintard,  1  N.  J.  Law, 

378.  109. 

Watson  V.  Williams,  4  Blackf. 

26  ;  28  Am.  Dec.  36.  74. 

Waugh,  Milburn  v.,  11  Mo.  369.  56. 
Webb,  Brown  v.,  20  Ohio,  389.  49. 
Webb,  Hall  v.,  28  Mo.  408.  56. 

vVeber    v.   Armstrong,   70    Mo. 

217.  56,  144. 

Weeks  v.  Prescott,  53  Vt.  57.  110. 
Weimar,  Wood  v.,  104  U.  S.  786.  71. 
Welch,  Reynolds  v.,  47  Ala.  200. 

102,  150. 
Welsh  V.  Bekey,  1  Penn.  57.  77, 148. 
Welsh,  Levy  v.,  2  Edw.  Ch.  438. 

39,  40. 
West,  Bank  v.,  46  Me.  15.  142. 

West  V.  Snodgrass,  17  Ala.  549.  157. 
Westbury,  Bank  v.,  16  Hun,  458.  42. 
Whallon  v.  Scott,  10  Watts,  237.  141. 
Whedon,  Gregory  v.,  8  Neb.  373.  87. 
Wheelden  v.  Wilson,  44  Me.  11. 

97,  151. 
Wheeler,  Baxter  v.,  9  Pick.  21.  95. 
Wheeler,  Greenebaum  v.,  90  111. 

296.  55,  131. 

Whitbread,  Janes  v.,  5  Eng.  L. 

&.  E.  431.  140. 

Whitcomb,  Stafford  v.,  8  Allen, 

518.  142. 

White  V.  Graves,  68  Mo.  218.  57. 

White,  Partridge  v.,  59  Me.  564.  97. 
Whitwell,  Johnson  v.,  7  Pick.  71. 

95. 
Wilcox,  Curtis  v.,  49  Mich.  425.    89. 
Wilcoxson,  Ins.  Co.  v.,  21  Ind. 
355.  74,  75, 147. 


310 


CASES    CITED. 


SECTION 

Wiley  V.  Knight,  27  Ala.  336. 

102,  159. 
Wilhelmi   r.  Leonard,  13  Iowa, 

330.  90. 

Willard,  Shurtleff  v.,  19  Pick.  202. 

95, 159. 
Williams  v.  Briggs,  11  K.  I.  476. 

107. 
Williams,  Coate  v.,  9  Eng.  L.  & 

E.  481.  140. 

Williams  v.  Evans,  6  Neb.  216.  87. 
Williams,  Ex  parte,  11  Ves.  3.  22. 
Williams,  Ford  v.,  24  N.  Y.  359. 

41,  43,  139. 
Williams,  Goodrich  v.,  50  Ga.  425. 

Ill,  132. 
Williams,  Horton  v.,  21  Minn.  187. 

50,  52,  54,  87,  147. 
Williams,  Watson  v.,  4  Blackf. 

26 ;  28  Am.  Dec.  36.  74. 

Williams  v.  Winsor,  12  K.  I.  9.  107. 
Willison  V.  Desenberg,  41  Mich. 

156.  89. 

Wilson,  Eead  v.,  22  111.  377.  54. 

Wilson,  Ross  v.,  7  Bush,  29.  98. 

Wilson  V.  Sullivan,  58  N.  H.  260. 

46,  139. 
Wilson,  Wheelden  v.,  44  Me.  11. 

97, 151. 
Wilson  &  Wormal's  Case,  God- 
bolt,  161,  160. 
Wilt  V.  Franklin,  1  Binn.  502 ;  2 

Am.  Dec.  474.  78,  151- 

Wimbish  v.  Tailbois,  Plowden,  38. 

121,  149. 
Wimer,  Brooks  v.,  20  Mo.  503. 

56,  57,  148. 
Wimer,  Walter  v.,  24  Mo.  63.  56. 
Windham,  Townshend  v.,  2  Ves. 

sr.  1.  161. 

Windsor,  Delopu.,  26  La.  An.  185. 

113. 
Wingler  v.  Sibley,  35  Mich.  231.    89. 


SECTION 

Winkley  v.  Hill,  9  N.  H.  31 ;  31 

Am.  Dec.  215.  44. 

Winne,  Russell  v.,  37  N.  Y.  591. 

41,  43,  122,  131,  148 
Winslow,  Mitchell  v.,  2  Story,  630. 

47,  56,  70,  73,  130. 
Winsor,  Williams  v.,  12  R.  1. 9.  107. 
Wiswall,  Ticknor  v.,  9  Ala.  305.  101. 
Wiswall  V.  Ticknor,  6  Ala.  178.  101. 
Wolfe  V.  Dorr,  24  Me.  104.  97. 

Wood  V.  Lowry,  17  Wend.  492. 

39,  40,  41,  50,  71,  87,  148. 
Wood,  Moore  v.,  100  III.  451.  151. 
Wood  V.  Weimar,  104  U.  S.  786.  71. 
Wooderman  v.  Baldock,  8  Taunt. 

676.  25. 

Woodfln,  Foster  v.,  11  Ired.  Law, 

339.  81. 

Woodrow  V.  Davis,  2  B.  Mon.  298. 

98. 
Woods,  Clow  v.,  5  S.  &  R.  275 ;  9 

Am.  Dec.  346.  77,  78,  148. 

Woodward  v.  Goodman,  3  Cent. 

L.  Jour.  43.  60,  141. 

Woodward,  Russell  v.,  10  Pick. 

408.  95. 

Woolloton,  Jarman  v.,  3  Term, 

618.  ,       29. 

Wordall  v.  Smith,  1  Camp.  332. 

11,  27. 
Worman  v.  Kramer,  73  Penn.  St. 

378.  78. 

Worseley  v.  De  Mattos,  1  Burr. 

467.  8,  119,  122,  131. 

Wright,  McLachlan  v.,  3  Wend. 

348.  38. 

Yates  V.  Olmsted,  56  K  Y.  632 ; 

65  Barb.  43.  41,  55. 

Young  V.  Booe,  11  Ired.  Law,  347. 

82,  84. 
Young,  Nailer  v.,  7  Lea,  735.  60, 147. 
Young,  Ross  v.,  5  Sneed,  627.        159. 


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